Multiple levers for margin recovery heading into Dells F2Q print: BofA

Bank of America analysts remain bullish on Dell Technologies (NYSE:DELL ) as the company approaches its F2Q earnings report on August 29.

Despite recent stock pullbacks, BofA reiterated its Buy rating on the stock, citing "multiple levers for margin recovery" and a strong setup heading into 2025.

BofA models Dell's F2Q revenue at $24.07 billion with an EPS of $1.75, slightly above the consensus of $24.13 billion and $1.68 EPS. The firm expects ISG operating margins to hit double digits, signaling strength across Dell's portfolio.

BofA lowered its price target for the stock from $180 to $150, reflecting peer averages but maintains confidence in the stock's fundamentals.

AI server demand, while described as "lumpy" in terms of size and timing, remains a key focus for Dell. BofA estimates that Dell will exit F2Q with a $4.5 billion AI server backlog, with long-term margin improvement anticipated as the mix of enterprise and sovereign clients increases. This is expected to positively impact Dell's balance of orders, backlog, and shipments growth.

In the storage segment, BofA predicts a recovery in operating margins, driven by several factors including a typical refresh cycle following ISS growth, new IBM mainframe launches in 2025, and share recovery from new QLC-based offerings.

Regarding the PC segment, while F2Q guidance suggests a low single-digit year-over-year decline, BofA forecasts FY25 client solutions group growth of 2.7%, supported by factors such as back-to-school promotions, the Windows 10 end-of-life refresh, and an aging installed base from COVID-era PCs.

Overall, BofA sees Dell's diversified portfolio and strategic positioning as key drivers of margin recovery, making the stock an attractive long-term investment opportunity.

Source: Investing.com