Dell stock price has bounced back in the past few weeks as investors wait for the upcoming earnings, which will provide more color about its business. After bottoming at $86.95 in August, it has rebounded by almost 60% to trade at $138.85, giving it a market cap of over $87 billion.
Dell earnings ahead
Dell Technologies is a top American technology company best known for its laptop and desktop computers. Data shows that it has the third-largest market share in the PC industry after Lenovo and HP.
The company has also expanded its business to other solutions, which it classifies as Infrastructure Solutions Group (ISG). This division includes products like servers, storage, and virtualization software.
As a result, Dell has become an important part of the artificial intelligence industry, where it provides products to companies like Microsoft, Amazon, and Google that operate large data centers globally. Dell competes with firms like Super Micro Computer and HP Enterprise.
A small part of Dell’s business is in finance, where it provides finances to some of its biggest customers.
Dell stock price has done well in the past few years, helped by the growth of key areas like artificial intelligence and machine learning.
The PC industry has also bounced back after going through major headwinds a few years ago. Also, the company has sold its VMware business to Broadcom for over $60 billion. It has jumped by 432% in the past five years, beating its closest rivals like HP and Cisco.
The next key catalyst for the Dell stock price will be its earnings, which are scheduled to happen on Tuesday next week. These will be important numbers because they will provide more color about the state of its business.
Just this week, NVIDIA said that its AI business continued firing on all cylinders as its revenue jumped to over $37 billion. Palantir, another top name in the AI industry continued doing well during the quarter.
Analysts anticipate the results to show that Dell’s business continued doing well last quarter. Precisely, they expect its revenues to come in at $24.7 billion, a 11% increase from what it made last year.
Analysts expect that its fourth-quarter revenue will be $25.53 billion an increase of 14.3%, leading to an annual figure of over $97.5 billion. The company will then cross the $100 billion revenue in 2025.
Dell has a long record of beating estimates
There are chances that Dell’s results will be better than expected because it has a long record of doing well.
The most recent financial results showed that Dell’s revenue rose by 9% to $25 billion in its fiscal second quarter. Its operating income rose to $1.3 billion.
Most of its revenue growth was in its infrastructure solutions segment whose revenues jumped by 12% to $24.1 billion. Its client solutions revenue fell by 4% to $12.4 billion as PC weakness persisted.
Dell has also worked hard to improve its balance sheet. It used part of its VMware proceeds to pay down its debt, which has now reduced from over $28 billion in 2021 to $14.8 billion. Paying back its debt helps it to increase its shareholder returns over time.
Dell is also fairly valued since it trades at a price-to-earnings ratio of 17, lower than the sector median of 24. Its forward EV-to-EBITDA of 10 is lower than the industry median of 14.
Dell stock price analysis
Dell chart by TradingView
The daily chart shows that the Dell share price has been in a slow bullish trend in the past few weeks. It has risen from $87.16 in August to $140. It has moved above the 50-day and 100-day Exponential Moving Averages (EMA).
However, the stock has formed a rising wedge pattern, which is a popular bearish sign in the market. This pattern often breaks down when the two lines near their confluence level.
The MACD and the Relative Strength Index (RSI) have formed a bearish divergence chart pattern. Therefore, there is a likelihood that the stock will have a bearish breakdown in the coming weeks. If this happens, the next point to watch will be at $120. However, a break above the key resistance level at $150 will invalidate the bearish view.
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