It's no secret that the rage surrounding tablets has led to decreased consumer interest in "traditional" desktop computing -- and as such, companies that cater primarily to users of "traditional" computers have elicited less-than-thrilled responses from investors as of late.
Nonetheless, the sell-off of many of these companies has made some available for a fairly attractive valuation. One of these companies is Dell (DELL). The market has not been kind to Dell, but at current prices, it may be worth a look as a "value" stock based on several factors.
- Dell isn't about just PCs. While people traditionally associate Dell with desktop computers and laptops (I'm writing this article on a Dell laptop), Dell is expanding operations in multiple areas. Any move towards tablets and mobile computing will not reduce reliance on data centers and the like. (In fact, cloud computing inherently requires increasing reliance on data centers.) Dell is positioning itself in this sector of the industry and projects revenues from data-center products and technology services will soar 45% to $27.5 billion by fiscal year 2016.
- Dell recently established a dividend program (see the previous link). The dividend, at 32 cents a year, works out to a solid 2.6% yield at current stock prices.
- Dell also has a shareholder-friendly buyback program in place.
- Analysts are generally positive on Dell's prospects. Of the 30 firms covering Dell, 9 rate it a "strong buy," 5 rate it a "buy," 14 rate it a "hold," and only 2 rate it as "reduce." No analysts have a "sell" rating outstanding.
- Analyst price targets suggest there's a lot more upside than downside. The target range is $11 to $19.50, with a mean of $16.00. The mean price target represents an upside of over 30%, not including the dividend.
- Dell is very cheap right now, at a trailing P/E of 6.5 and a forward P/E of 6.2.
- Founder, CEO, and chariman Michael Dell currently holds 243M shares, which have a market value of nearly $3 billion at current prices. This large personal stake in the company shouldn't be taken lightly -- he clearly has a personal incentive to ensure the company continues to succeed and grow.