Cloud and artificial intelligence revenue generation and future opportunities could be the key items analysts and investors are watching for in the second-quarter earnings report from Dell Technologies DELL on Thursday after market close.
Earnings Estimates: Analysts expect Dell to report second-quarter revenue of $24.14 billion, according to data from Benzinga Pro.
The company reported revenue of $22.93 billion in last year's second quarter. Dell has beaten analyst estimates for revenue in eight of the last 10 quarters, including two straight quarters.
Analysts expect the company to report second-quarter earnings per share of $1.71, which would be down from $1.74 reported in last year's second quarter. The company has beaten analyst estimates for earnings per share in nine straight quarters.
The second-quarter earnings report comes with Dell stock up 46% year-to-date, as shown on the Benzinga Pro chart below.
What Analysts are Saying: Dell's second-quarter results could be an opportunity for the company to show progress made on margins, JPMorgan analyst Samik Chatterjee said in a new investor note.
The analyst reiterated an Overweight rating and $160 price target ahead of earnings.
"With outlooks now even lower after the Super Micro print, we see a set up where investors will be relieved by significant progress made relative to ISG margins, with lower focus on other metrics, like AI server revenue and backlog, relative to prior quarters," Chatterjee said.
Chatterjee said investors are concerned that cost cuts and workforce reductions are a sign of weakened demand.
"We believe these concerns will be trounced by the strong demand backup for AI servers, as evidenced by revenue guidance from Super Micro."
The analyst said cost cuts are part of the company's transformation and could help improve profit margins from its AI server opportunity.
"We are more positively inclined toward the AI-driven compute investment cycle, which should benefit branded server companies."
Chatterjee said that while Dell isn't a primary beneficiary of the AI investment cycle, server companies will benefit from selling higher-end servers with higher average sale prices.
Here are other recent analyst ratings on Dell and their price targets:
- Bank of America: Maintained buy rating, lowered price target from $180 to $150
- Morgan Stanley: Maintained Overweight rating, lowered price target from $155 to $142
- Citigroup: Maintained Buy rating, lowered price target from $170 to $155
- Wells Fargo: Maintained Overweight rating, lowered price target from $175 to $150
- Barclays: Upgraded from Underweight to Equal-Weight, with $97 price target
- Evercore ISI: Maintained Outperform rating, lowered price target from $165 to $140
Read Also: Delaware Court Upholds $267M Fee For Dell Shareholders: Report
Key Items to Watch: Artificial intelligence will likely be top of mind for investors when reading Dell's earnings report. The company will be reporting quarterly financial earnings a day after NVIDIA Corporation, one of the companies that is leading the growth of AI use cases.
In its first-quarter financial earnings, Dell made their AI opportunity known.
"No company is better positioned than Dell to bring AI to the enterprise," Dell Chief Operating Officer Jeff Clarke said.
The first quarter saw AI-optimized server orders growing, with shipments up more than 100% quarter-over-quarter. The backlog of the servers also was up 30% to $3.8 billion in the first quarter.
With the report coming after Nvidia, Dell could have a high bar to clear when talking about its AI opportunity once again.
While many analysts have been cutting their price targets, CNBC host Jim Cramer called the bottom in the stock in mid-August, following an upgrade from Barclays.
"Historically, you want to buy this company after it's been hammered. Regardless, it's just been right to do that, so I agree with Barclays. This stock should be bought right here," Cramer said.
Cramer also highlighted the fact that Dell CEO Michael Dell was "singled out" at an Nvidia event as a person to do business with, suggesting that Dell could be a strong contender in the AI sector.
DELL Price Action: Dell shares are down 1.4% to $110.22 on Wednesday, versus a 52-week trading range of $53.62 to $179.70.
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