Dell Wins Over A Sell-Side Bull On Market Share Gains, Balance Sheet Delevering

Dell Technologies Inc DELL, which recently returned to the public markets through an unconventional transaction, is a worthy investment, according to Raymond James.

The Analyst

Analyst Simon Leopold initiated coverage of Dell shares with an Outperform rating and a $57 price target.

The Thesis

Even as Dell's debt burden and limited access to VMware, Inc. VMW's cash weigh on the shares, the company's market share gains and benefits from favorable enterprise spending patterns — along with de-levering of its balance sheet can unlock value — Leopold said in a Monday note.

Dell is confident of expanding share in its core markets, namely servers, storage and PCs, the analyst said. 

The company's integration with EMC has come along after years of poor execution, he said, citing channel checks.

The launch of a new midrange storage platform in late 2019 is a catalyst, Leopold said. Worries over webscale exposure in servers is overdone, he said, as it accounts for than 10 percent of server sales.

The top PC makers, including Dell, are consolidating their market share, the analyst said. Dell may gain from HP Inc HPQ's pain, he said. 

Notwithstanding a lack of near-term catalysts, Raymond James said evidence of share gains and refinancing debt could help the stock.

The firm's estimates call for calendar 2018 sales of $91.5 billion and non-GAAP EPS of $6.30. For calendar 2020, Raymond James estimates sales growth of 4.4 percent to $95.5 billion and non-GAAP EPS of $6.86.

The Price Action

Dell shares were trading up slightly at $46.91 at the time of publication Tuesday. 

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