Amid concerns about the information-technology spending landscape, Dell Technologies Inc. delivered better-than-expected quarterly results showing that the company is managing the industry challenges.
Dell’s DELL, +10.18% latest numbers, which included a sizable earnings beat, were particularly notable given that many of the company’s peers missed expectations and had to lower their forecasts, according to Evercore ISI analyst Amit Daryanani, who has an outperform rating and $63 target on the stock.
He titled his note to clients: “If There Is an IT Slowdown, Michael Didn’t Get the Memo.”
Dell shares were up 9% in premarket trading Friday.
Raymond James analyst Simon Leopold called Dell “a nice house in a tough neighborhood,” writing that while the IT spending environment is still difficult, Dell is outperforming its rivals. He raised his price target by a dollar, to $62 from $61, while keeping an outperform rating on the stock.
Citi analyst Jim Suva pointed to Dell’s 1% sales growth on a year-over-year basis, while NetApp Inc.’s NTAP, +0.33% sales dropped 16%, Hewlett Packard Enterprise Co.’s HPE, +1.02% sales fell 7%, and HP Inc.’s HPQ, +1.11% sales were flat. “While one can slice the products and end markets to try to discount Dell’s progress or explain the softness by competitors, it’s clear that Dell’s breadth and depth of product offerings are gaining traction,” he wrote.
Suva rates the stock a buy with a $65 target.
Others pointed to some areas of concern in Dell’s results, notably in the company’s server division which saw a 12% revenue drop. “The company commented that in 2H it plans to bias its balance of growth versus profitability towards growth,” wrote Barclays analyst Tim Long. “This could help reverse server revenue trends but also weigh on margin.”
While Dell beat profit expectations in its most recent quarter, Long expects those numbers to “gradually normalize as the benefits of lower component costs flow through the model.”
He has an equal weight rating on the shares and moved his price target up to $54 from $53.
Credit Suisse’s Matthew Cabral echoed the sentiment. “Dell’s ‘family approach’ and the resulting diversified portfolio is a clear benefit in choppier times, evidenced by a healthy PC demand environment that offsets accelerating enterprise weakness,” he wrote. “That said, we’re concerned by management commentary suggesting a more aggressive pricing environment in 2H, particularly given margins have been a key offset to EPS for both Dell and the wider industry against a tougher demand backdrop.”
He has a neutral rating on Dell’s stock and increased his price target to $61 from $58.
Dell shares have dropped 30% over the past three months, as the S&P 500 SPX, +0.06% has risen 5%.