On Tuesday, Evercore ISI maintained a positive stance on Dell Technologies Inc (NYSE:DELL), reiterating an Outperform rating and a $140.00 price target. The firm's confidence is buoyed by reports that Dell is gearing up to ship Blackwell-based servers starting in November, with a broader release of Nvidia (NASDAQ:NVDA)'s next-generation chip-based AI servers set for the first quarter of 2025.
The anticipation of Dell's AI server revenue is high, with projections to exceed $10 billion in fiscal year 2025 and potentially reaching around $12 billion the following year. The company's financial outlook does not currently include the expected ramp-up of Blackwell, suggesting there could be additional upside to the AI server revenue targets for the January quarter.
Dell's market position appears to be strengthening due to uncertainties surrounding one of its competitors, Super Micro Computer Inc. (NASDAQ:SMCI), which may be contributing to Dell's increased share in large accounts. Companies such as CoreWeave and those under Elon Musk's umbrella, which typically source AI servers from multiple suppliers, might lean more towards Dell, provided pricing remains competitive.
The market dynamics for AI servers have evolved, with first-mover advantages diminishing, potentially allowing Dell, and possibly Hewlett Packard Enterprise (NYSE:HPE), to capture more market share in upcoming product rollouts. The focus for Dell, however, is not solely on revenue growth but also on expanding sustainable EBIT margins throughout fiscal year 2025. Additionally, Dell aims to leverage opportunities to bundle networking, storage, and services with AI server sales to these large customers.
Overall, the sentiment from Evercore ISI is firmly in favor of Dell's stock, with expectations of significant growth in the AI server segment and sustainable profitability in the near future. The reiterated Outperform rating and $140 price target reflect this positive outlook.
In other recent news, Dell Technologies has announced a series of strategic advancements and financial maneuvers. The company has unveiled new AI-focused products and services including the Dell Integrated Rack 7000, PowerEdge XE9712 in collaboration with NVIDIA, and the PowerEdge M7725 server powered by 5th Gen AMD (NASDAQ:AMD) EPYC CPUs. Dell has also issued $1.5 billion in senior notes, consisting of two tranches: $700 million of 4.350% notes due 2030 and $800 million of 4.850% notes due 2035.
In addition, Dell has expanded its AI offerings with new AMD-powered servers, aiming to simplify and accelerate enterprise AI adoption. This includes five new Dell PowerEdge servers equipped with AMD 5th Generation EPYC processors. Furthermore, Dell has mandated a full office work week for its global sales team, aiming to enhance collaboration and skill development.
InvestingPro Insights
Dell Technologies Inc (NYSE:DELL) continues to show strong market performance, aligning with Evercore ISI's positive outlook. According to InvestingPro data, Dell's market capitalization stands at $88.44 billion, reflecting its significant presence in the Technology Hardware, Storage & Peripherals industry. The company's revenue for the last twelve months reached $91.84 billion, with a quarterly revenue growth of 9.12% in the most recent quarter, indicating robust demand for its products and services.
InvestingPro Tips highlight Dell's aggressive share buyback program and high shareholder yield, which could be contributing factors to its strong stock performance. The company's stock has shown an impressive 91.96% total return over the past year, significantly outperforming the broader market. This aligns with the article's discussion of Dell's potential for growth in the AI server market and its strengthening market position.
Moreover, Dell's P/E ratio of 22.65 and forward P/E ratio of 19.69 suggest that the stock may still be attractively valued relative to its earnings potential, especially considering the projected growth in AI server revenue mentioned in the article. The company's dividend yield of 1.39% and a dividend growth rate of 20.27% over the last twelve months further enhance its appeal to investors looking for both growth and income.
For readers interested in a deeper analysis, InvestingPro offers 12 additional tips for Dell, providing a comprehensive view of the company's financial health and market position.
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