Dell Technologies Inc. (DELL) has been able to create a moat comparable to what Apple Inc. (AAPL) possesses in the consumer electronics space. So, if you like AAPL but don’t want to enter the stock at its current valuation, given its bleak near-term growth prospects, I think DELL could be an excellent alternative for your watchlist.
Both AAPL and DELL owe their enduring competitive advantages to their sticky products, innovative product design, and brand value built on trust, service, and unique experiences through a robust ecosystem.
DELL differentiates itself from its rivals by focusing majorly on institutional customers, to whom it can directly sell customized products to serve their requirements best. With the industry’s largest direct sales force, the company is best positioned to anticipate and respond to its customers’ ever-changing needs while cutting out intermediaries to retain a larger share of profits.
Understanding their customers enables DELL to deliver superior quality and command a premium.
DELL’s stock has gained 3.4% over the past month to close the last trading session at $41.61, above its 50-day moving average of $40.97.
Let’s closely examine the factors that make DELL worthy of consideration.
Solid Financials
During the third quarter of fiscal 2023, which ended October 28, 2022, DELL’s net revenue came in at $24.72 billion, while its non-GAAP operating income increased 21.7% year-over-year to a record $2.38 billion.
As a result, the company’s non-GAAP net income increased 29.9% and 38.6% year-over-year to $1.71 billion, or $2.30 per share, respectively.
Optimistic Analyst Estimates
Ahead of its fourth quarter and fiscal year 2023 earnings release on March 2, Analysts expect DELL’s revenue for the year to come in at $100.55 million. During the same period, the company’s EPS is expected to come in at $7.39, up 18.9% year-over-year.
DELL has an impressive earnings surprise history since it has surpassed consensus EPS estimates in three of the trailing four quarters.
Attractive Valuations
In terms of forward P/E, DELL is currently trading at 5.63x, 71.7% lower than the industry average of 19.89x. Similarly, its forward EV/Sales and EV/EBITDA multiples of 0.53 and 4.99 are 81.3% and 60.1% lower than the industry averages of 2.83 and 12.50, respectively.
Moreover, DELL’s forward Price/Sales multiple of 0.30 also compares favorably to the industry average of 2.73.
POWR Ratings Reflect Robustness
DELL’s steady fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DELL has a B grade for Growth and Sentiment, in sync with upbeat analyst estimates.
It also has a B grade for Value, consistent with its attractive valuation.
DELL ranks #5 of 43 stocks in the Technology - Hardware industry.
Click here to see the additional POWR Ratings for DELL’s Stability, Momentum, and Quality.
Bottom Line
DELL’s rapid response to evolving customer needs is evident from the Dell PowerEdge server portfolio expansion for enhanced performance, including up to 2.9x greater AI inferencing and greater energy efficiency. These servers are also a key component to enable the company to help the telecommunications industry accelerate the adoption of open, cloud-native technologies.
In addition, with employers increasingly recalling employees to offices, DELL’s presence in the institutional information technology solutions space could be a major tailwind for the stock, which is currently available at an attractive valuation.
In view of the above, DELL deserves a place on the watchlist of investors looking to be the earliest to capitalize on the resurgence of demand for IT hardware.
How Does Dell Technologies Inc. (DELL) Stack up Against Its Peers?
While DELL has an overall POWR Rating of B, which equates to a Buy, investors could also consider looking at its A-rated industry peers: Ricoh Company, Ltd. (RICOY), Spirent Communications plc (SPMYY), and Vtech Holdings Limited (VTKLY).
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DELL shares were trading at $41.20 per share on Monday afternoon, down $0.41 (-0.99%). Year-to-date, DELL has gained 3.27%, versus a 4.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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