Dell a Potential Double - Analyst

Dell (DELL) isn’t dead yet. And in fact, Craig-Hallum analyst Christian Schwab this morning goes so far as to suggest the stock offers investors a potential double.

Asserting in a research note this morning that the company can still “get its groove back,” Schwab this morning launched coverage of the stock with a Buy rating and a $19 price target - that’s nearly twice yesterday’s close at $9.83, and higher than the 22 other Dell price targets tracked by Thomson/First Call.

“Rarely do investors get a chance to buy MegaCap, MegaRevenue, MegaBrand tech companies that have the potential to nearly double, but that’s exactly what we believe Dell could offer investors over the next year,” he writes.

He offers a four-part thesis for his aggressively bullish stance on the stock:

• The stock is at or near trough valuation on price/cash flow, price/book, EV/EBITDA and forward P/E.
• The company has a multi-year plan to right-size the business, and has already cut operating expenses substantially, bringing down cost per box by 5%. Total cost reduction target is now $4 billion.
• He is optimistic that IT spending will improve in the second half “as large corporations recover and credit becomes more available to small- and mid-sized businesses.”
• With even a modest economic recovery, he writes, the company could see “meaningful P/E expansion” as investors look for liquid, inexpensive, financially powerful companies.” He thinks the stock could trade up to 15x his EPS estimate for the January 2011 fiscal year of $1.26.

Schwab also contends that if he’s wrong, “downside is limited given the company’s continual profitability, significant free cash flow generation and current low valuation.”

Dell today is up 39 cents, or 3.97%, to $10.22.

Comments

[donzelion:]

I'd go one step further in the "downside expectations" - say unemployment rises to 20% in the US (v. projections of 10%), say IT spending falls in the US from 5-10% (v. projections of 2.5 - 5%).

Dell would go from profitable to unprofitable, and certainly suffer serious losses. Netbooks might obliterate margins from the notebook lines.

The question in my mind is: does Dell have the management, financial, and other capabilities necessary to respond, survive, and thrive? Absolutely.

Apr 09 06:28 AM

[Uncle Pie:]

I've disconnected my Dell computer. I kept getting messages saying "internet explorer has encountered a problem and needs to close" etc. I was getting this every few minutes. I maintained the Norton anti virus program and, paying them their protection money every year, ran their "live update" and "full system scan" programs regularly. Notwithstanding that, my Dell computer running Windows XP became infected with a virus that the Norton product was not even able to detect, let alone remove. The machine would take 5-10 minutes to boot up and the browser stopped responding to commands altogether. I went right out and bought a Mac which boots up in 45 seconds and there are no issues with viruses or spyware whatsoever. I am all done with PCs. I am all done with the Symantec Corporation. I am all done with the Microsoft corporation. I sent a message to the Symantec Corp. support and they sent back a form letter saying they were unable to detect or remove all kinds of malware. So why are they still in business? According to Consumer Reports, the best anti virus product on the market is something called Bit Defender. Looking that up, it turns out Bit Defender is a couple of clever people in Romania. So here's my question: with all the financial and intellectual resources of the great and mighty Microsoft Corporation, why is it that their operating system won't work unless their customers pay protection money to a couple of guys in Romania? Why would anyone buy a Dell PC? Or any PC? Why would anyone saddle themselves with an operating system by Microsoft, which will be hacked as soon as you connect to the internet, even if you have paid the Symantec corporation for their so-called protection? Game over for PCs!

Apr 09 10:09 AM

[mdpath:]

Are you long Dell?

Apr 09 11:37 AM

[Sepod:]

If we get 20% unemployment, we'll have a lot more to worry about then DELL. There will be anarchy in the Streets.


On Apr 09 06:28 AM donzelion wrote:

> I'd go one step further in the "downside expectations" - say unemployment
> rises to 20% in the US (v. projections of 10%), say IT spending falls
> in the US from 5-10% (v. projections of 2.5 - 5%).
>
> Dell would go from profitable to unprofitable, and certainly suffer
> serious losses. Netbooks might obliterate margins from the notebook
> lines.
>
> The question in my mind is: does Dell have the management, financial,
> and other capabilities necessary to respond, survive, and thrive?
> Absolutely.

Apr 09 05:02 PM

[tginomorebush:]

another savitz article with no disclosures

Apr 10 08:50 AM

[DM226:]

Running internet explorer was your main problem. If you ever use a PC again, run Firefox.


On Apr 09 10:09 AM Uncle Pie wrote:

> I've disconnected my Dell computer. I kept getting messages saying
> "internet explorer has encountered a problem and needs to close"
> etc. I was getting this every few minutes. I maintained the Norton
> anti virus program and, paying them their protection money every
> year, ran their "live update" and "full system scan" programs regularly.
> Notwithstanding that, my Dell computer running Windows XP became
> infected with a virus that the Norton product was not even able to
> detect, let alone remove. The machine would take 5-10 minutes to
> boot up and the browser stopped responding to commands altogether.
> I went right out and bought a Mac which boots up in 45 seconds and
> there are no issues with viruses or spyware whatsoever. I am all
> done with PCs. I am all done with the Symantec Corporation. I am
> all done with the Microsoft corporation. I sent a message to the
> Symantec Corp. support and they sent back a form letter saying they
> were unable to detect or remove all kinds of malware. So why are
> they still in business? According to Consumer Reports, the best anti
> virus product on the market is something called Bit Defender. Looking
> that up, it turns out Bit Defender is a couple of clever people in
> Romania. So here's my question: with all the financial and intellectual
> resources of the great and mighty Microsoft Corporation, why is it
> that their operating system won't work unless their customers pay
> protection money to a couple of guys in Romania? Why would anyone
> buy a Dell PC? Or any PC? Why would anyone saddle themselves with
> an operating system by Microsoft, which will be hacked as soon as
> you connect to the internet, even if you have paid the Symantec corporation
> for their so-called protection? Game over for PCs!

Apr 14 05:05 PM

[Hayweed:]

Dell is a dog that is having margin issues. They are cutting prices to compete with the far east. They are shutting down their factories and moving to third party assembly. Dell has no retail or store presence so repairs for people are nightmare,

Dell is just a generic box maker that will soon be gone since Lenovo Acer and other asian companies will eat their lunch. Plus Dell has cut prices which they will never be able to raise back. Apple has held the line during this mess and can cut prices if they want and take share or just wait out the downturn and make fat profits now and bigger one if the market turns.

If Dell makes a phone then look out below

Apr 15 06:40 AM