Deutsche Bank restarts Dell coverage at Buy on bullish growth outlook

Investing.com
Updated
Mitrade
coverImg
Source: Shutterstock

Investing.com --  Deutsche Bank  (ETR:DBKGn) on Thursday resumed coverage of Dell Technologies (NYSE:DELL) with a Buy rating and a price target of $144, which implies upside potential of around 14% from current levels.


The firm's bullish stance is founded on three main points.


Firstly, analysts predict Dell will experience an acceleration in top-line growth, entering double-digit percentages over the next several quarters. This growth is expected to be driven by a combination of favorable conditions in key segments such as servers, storage, and commercial PCs, where Dell holds a leading market share.


The Infrastructure Solutions Group (ISG), which accounts for roughly 45% of Dell's revenue, is likely to benefit from continued momentum in AI servers and a recovery in traditional servers and storage solutions, Deutsche Bank notes.


“We believe DELL is well positioned to capitalize on the next legs of AI growth/proliferation across enterprises, given its product scale, breadth of services/solutions and go to market footprint,” analysts said in the note.


Secondly, the bank foresees double-digit growth in Dell's bottom line in the coming years. That projection is supported by revenue improvements and effective operational expenditure (opex) management, which is expected to counterbalance any near-term pressure on gross margins.


Deutsche sees Dell’s earnings per share (EPS) growing at a 14% compound annual growth rate (CAGR) between the fiscal years 2025 to 2028, outpacing Dell's own long-term targets.


Lastly, Dell's capital allocation strategy is praised for its clarity and focus on returning the majority of its free cash flow (FCF) to shareholders.


Analysts estimate that adjusted FCF will grow from $4.8 billion in the current fiscal year (FY25E) to $7.4 billion by FY28E, with approximately 85% of that being returned to shareholders through dividends and share buybacks.


Dell's current dividend of $1.78 per share offers a 1.5% yield, and share repurchases are also expected to reduce the share count by about 6% over the next three years.


“It's worth noting this is in the context of an already clean balance sheet, with core leverage sitting at 1.4x as of last quarter (vs. DELL's long-term target of ~1.5x),” analysts concluded.


Dell shares surged more than 65% in 2024, outperforming the broader market.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

goTop
quote
Do you find this article useful?
Related Articles
placeholder
Should Netflix Replace Tesla in the "Magnificent Seven"?There's a disruptive enterprise in a completely different industry that has done almost as well. Netflix (NASDAQ: NFLX) is up 1,300% in the last 10 years. Clearly, both businesses would have made investors a lot of money.
Author  The Motley Fool
6 hours ago
There's a disruptive enterprise in a completely different industry that has done almost as well. Netflix (NASDAQ: NFLX) is up 1,300% in the last 10 years. Clearly, both businesses would have made investors a lot of money.
placeholder
Kamala Harris faces uphill battle according to US elections betting oddsAs Americans head to the polls to elect the 47th President of the United States, betting odds suggest that Vice President Kamala Harris is facing an uphill battle against former President Donald Trump.
Author  FXStreet
8 hours ago
As Americans head to the polls to elect the 47th President of the United States, betting odds suggest that Vice President Kamala Harris is facing an uphill battle against former President Donald Trump.
placeholder
Why China’s consumer slump is affecting U.S. economyAmerican brands in China are feeling the heat. Sales are falling fast, as Chinese consumers hold back on spending. For major players like Apple, Starbucks, and Nike, the China market has long been a cash cow.
Author  Cryptopolitan
8 hours ago
American brands in China are feeling the heat. Sales are falling fast, as Chinese consumers hold back on spending. For major players like Apple, Starbucks, and Nike, the China market has long been a cash cow.
placeholder
Palantir Stock Soars as "Unrelenting" Artificial Intelligence (AI) Demand Drives 43% Earnings Growth and Annual Guidance RaisePalantir Technologies (NYSE: PLTR) stock gained 13.7% in Monday's after-hours trading, following the software-as-a-service (SaaS) company's release of a robust third-quarter 2024 r
Author  The Motley Fool
8 hours ago
Palantir Technologies (NYSE: PLTR) stock gained 13.7% in Monday's after-hours trading, following the software-as-a-service (SaaS) company's release of a robust third-quarter 2024 r
placeholder
Novo Nordisk Q3 Earnings Preview: Investors to Focus on Wegovy SalesInsights– Novo Nordisk (NVO.US) is set to release its Q3 earnings before the market opens on Wednesday, November 6. Investors will focus on the latest supply-demand dynamics and market share of its
Author  Mitrade
10 hours ago
Insights– Novo Nordisk (NVO.US) is set to release its Q3 earnings before the market opens on Wednesday, November 6. Investors will focus on the latest supply-demand dynamics and market share of its