FMP

FMP

Enter

Morgan Stanley analysts reiterated their Overweight rating on Dell (NYSE:DELL) with a price target of $155 on the stock. Currently, shares are up more than 3% i

Morgan Stanley Maintains Bullish Stance on Dell

-

twitterlinkedinfacebook
blog post cover photo

Image credit: FMP

Morgan Stanley analysts reiterated their Overweight rating on Dell (NYSE:DELL) with a price target of $155 on the stock. Currently, shares are up more than 3% intra-day.

The analysts' confidence in Dell's potential for outperformance is based on several factors: strong competitive positioning in the rapidly expanding AI server market, improving profit margins, and enhanced execution in the storage sector, which should boost estimates and valuation. Dell remains a top pick with a $155 price target and a bullish scenario reaching $200.

The analysts dismissed concerns about AI server margins that surfaced during the April quarter, projecting an upward trend in these margins over time. They asserted that Dell's AI server gross margins are comparable to those of other leading OEMs, with Dell pricing its AI servers about 10% higher than its peers. Notably, 25% of Dell Financial Services (DFS) originations last quarter were AI servers.

Most of Dell's cloud service provider and enterprise AI server deals include high-margin, sticky services that are deferred and amortized over time, with services making up about 10% or less of the total system price. Management highlighted that more AI server services revenue is currently being deferred than amortized, suggesting that as amortization schedules progress, AI server revenue and gross margins should improve.

The analysts also pointed to a favorable shift towards sovereign and enterprise clients, where margins are significantly better, and the increasing scale of Dell's AI server business. With operating expenses down slightly year-over-year and revenue up in the low double digits, they see a path to stronger AI server margins over time, contrary to current consensus expectations.

Other Blogs

Nov 25, 2023 6:39 AM - Parth Sanghvi

DCF Valuation vs. Comparable Companies Analysis: Choosing the Right Valuation Method

Choosing the Right Valuation Method: DCF vs. Comparable Companies Analysis Introduction: Valuation methods play a pivotal role in determining the fair value of a company, aiding investors in making informed investment decisions. Two commonly used methods, DCF Valuation and Comparable Companies A...

blog post title

Dec 23, 2023 2:19 AM - Parth Sanghvi

Understanding the Limitations of DCF Analysis: A Guide to Overcoming Challenges

Introduction: Discounted Cash Flow (DCF) analysis stands as a cornerstone in valuing investments, yet its efficacy is contingent upon various assumptions and methodologies. While a powerful tool, DCF analysis comes with inherent limitations and challenges that investors must acknowledge to make i...

blog post title

Dec 25, 2023 2:28 AM - Parth Sanghvi

Integrating Sustainability into Valuations: Navigating ESG Factors within the Discounted Cash Flow (DCF) Model

Introduction: The investment landscape is undergoing a profound shift with a heightened emphasis on sustainability and responsible investing. In this blog post, we explore the intersection of Environmental, Social, and Governance (ESG) considerations within the Discounted Cash Flow (DCF) model, h...

blog post title
FMP

FMP

Financial Modeling Prep API provides real time stock price, company financial statements, major index prices, stock historical data, forex real time rate and cryptocurrencies. Financial Modeling Prep stock price API is in real time, the company reports can be found in quarter or annual format, and goes back 30 years in history.
twitterlinkedinfacebookinstagram
2017-2024 © Financial Modeling Prep