Dell Technologies Stock Took Off This Week. Why There Could Be More to Come.
Key Points
Dell has averaged 14% annual diluted EPS growth over the last five fiscal years.
The company is now well-postioned to capitalize on the fast-growing AI infrastructure buildout.
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Dell Technologies (NYSE: DELL) stock may be emerging as the next artificial intelligence (AI) investor favorite. Shares soared as much as 17% this week after the company held its latest analyst meeting.
The stock remained higher for the week by about 12% as of late Friday morning, according to data provided by S&P Global Market Intelligence. The jump in share price this week brought Dell stock to a new 52-week high.
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The Dell Technologies AI growth story
Management at Dell Technologies presented to analysts this week, highlighting the company's strong track record for generating cash flow and boosting earnings per share. The personal computer (PC) maker and rack server provider has generated about $5 billion in adjusted free cash flow annually for the last five years. Diluted earnings per share have averaged 14% annual growth over that time, too.
Until the recent push higher, though, Dell stock hasn't really acted like a growth stock this year. That growth is now accelerating, too. Dell is well-positioned to capitalize on AI opportunities. Its infrastructure solutions segment reported record revenue in the fiscal second quarter, growing 44% year over year. Servers and networking revenue grew even faster.
Dell raised guidance in the last report and now projects over $20 billion in AI server sales this fiscal year. Dell shares are still reasonably valued based on those growth projections. Its forward price-to-earnings (P/E) is well below the market average, making it a good time to buy Dell stock.
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Howard Smith has positions in Dell Technologies. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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