Why “Phenomenal” Results Still Only Get Dell a Hold Rating
Dell Technologies reported strong fiscal second-quarter earnings, outpacing analyst expectations with record demand for artificial intelligence servers. Despite this impressive performance, one Wall Street firm, TD Cowen, maintained a Hold rating for Dell. On September 2, TD Cowen raised its price target on Dell shares to $500.00 from $450.00 while retaining a Hold rating.
The firm credits Dell's robust quarter to demand for AI servers, which contributed $16.4 billion in revenue, and now projects a $74 billion AI server outlook for the year, a 200% year-over-year increase. Dell's AI server revenue was a key driver of the company's 58% year-over-year revenue growth to $46.97 billion and adjusted earnings per share of $7.04, surpassing expectations.
TD Cowen cites component cost inflation as a potential risk for Dell, though operating efficiencies have mitigated this issue so far. The firm's valuation approach uses a 16x multiple on FY28 EPS, versus a 21x multiple previously, leading to its price target of $500.00. Despite the strong financial results, TD Cowen believes Dell's stock may not offer significant upside potential compared to other AI stocks.
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