On Friday, BofA Securities expressed a positive outlook on Dell Technologies Inc (NYSE:DELL), increasing the stock's price target to $98 from $82 while maintaining a Buy rating. The adjustment comes ahead of Dell's fourth-quarter fiscal year 2024 earnings report, which is scheduled for release after the market closes on Thursday, February 29th.
The optimism from BofA Securities is partly due to the strong data center revenues reported by Nvidia (NASDAQ:NVDA), which highlighted robust demand for AI-related technologies that is expected to continue for years. Dell has seen momentum in its server business, with the company's management previously reporting a significant increase in the pipeline for AI servers.
Dell's focus on enterprise clients, as opposed to hyperscale ones, positions it to benefit from the rising demand as companies begin to fine-tune AI models and escalate inferencing with those models. Although the overall recovery of the PC market has been slower than initially anticipated, Dell is expected to see gains in the second half of 2024 from the launch of AI-enabled PCs.
During the upcoming earnings call, investors will be looking for insights into how AI-driven workloads contribute to Dell's revenue and margins. The company has also emphasized its commitment to capital returns, targeting to return over 80% of its free cash flow to shareholders, which further supports the rationale behind the Buy rating reiterated by BofA Securities. Dell's financial performance is also anticipated to benefit from a negative cash conversion cycle as PC revenue growth continues.
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