Dell 'well-positioned' into earnings: Evercore

Dell Technologies (NYSE:DELL ) appears "well-positioned" ahead of its upcoming earnings report, according to analysts at Evercore ISI.

The firm said in a note Friday that it believes Dell is likely to meet, if not exceed, consensus estimates for the July quarter, which currently stand at $24.14 billion in revenue and $1.68 in EPS.

This optimism is driven by a stronger demand environment across Dell's core businesses, including x86 servers, PCs, and storage, with additional upside expected from AI server shipments.

Evercore believes a key focus for investors will be Dell’s Infrastructure Solutions Group (ISG) margins. The firm's analysts noted that concerns about AI server margins have grown following Super Micro Computer’s (SMCI) recent margin underperformance.

However, Evercore believes that Dell can counter this narrative by demonstrating that any margin weakness in Q1 was due to issues in its storage business rather than dilution from AI servers.

Evercore ISI also flagged concerns about recent reports of layoffs at Dell, which followed a significant headcount reduction in February 2023.

"Buyside fears remain indexed to ISG margin underperformance and reports of sizable layoffs," Evercore wrote.

Despite these concerns, the firm remains confident that demand has improved across Dell's core segments. Specifically, demand has risen for x86 servers, driven by average selling prices (ASP), PCs, driven by unit growth, and storage, particularly in the flash segment.

"To the extent demand structurally remains better vs. CY23, and ISG margins show sequential expansion through FY25, we think investors will be more comfortable stepping in," added Evercore.

The firm maintained its Outperform rating on Dell with a $140 price target.

Source: Investing.com