© Reuters. Dell’s (DELL) Valuation Attractive Despite Headwinds – BofA
By Sam Boughedda
Dell Technologies (NYSE:) valuation is attractive despite the current headwinds, BofA analysts said in a note to clients on Wednesday.
The analysts, who have a Buy rating and a $60 price target on the stock, did, however, state that the limited visibility around C23 earnings impacts the company’s valuation.
“Dell’s shares have lost 40% YTD, and have underperformed the S&P500 (-25% YTD). Investor concerns are centered on erosion in PC demand, margins and signs of weakening enterprise demand (which would adversely impact server/storage revenues),” explained the analysts.
The BofA analysts explained that Dell’s share price of $33.87 at Tuesday’s close “implies F2024 (C2023) NOPAT/share of $5.62, based on our assumed steady state EV/NOPAT multiple of ~11x.” This suggests the market is pricing in y/y rev decline of 12% y/y and OM of 6%, they wrote.
“Dell has not seen this level of combined rev/OM erosion at any point since re-listing. We view valuation as attractive, although we recognize that there is not an imminent catalyst for turnaround in shares.” the analysts added.
BofA expects Dell shares to re-rate higher once visibility of the trajectory improves and confidence in estimates re-emerges. In addition, the analysts believe Dell will gain revenue share in PCs, storage, and servers.
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