Dell Reports Another Impressive Quarter, Citigroup Raises PT To $19

Citigroup has published a research report on Dell, Inc. DELL after the company reported another impressive quarter, with in-line revenues and EPS well above analyst estimates. In the report, Citigroup writes "Despite a return to more trendline growth rates in corporate hardware shipments, we still expect the company to achieve high single-digit earnings growth during the next 2 years based on improving mix, operating leverage, and share repo. With valuation at 5x F12 EPS (ex-net cash) and a 14-15% FCF yield, we believe investor concerns regarding secular headwinds and margin volatility are already fully reflected in the shares. Despite relatively in-line revenue, non-GAAP EPS of $0.53 was well above our estimate of $0.40. The upside was entirely driven by impressive gross margin of 21.5% thanks to very favorable component pricing during the quarter, particularly memory. While we admit that 21%+ gross margin is unsustainable in the medium-term, we believe 19% is an achievable target based on improving product mix and on-going structural changes (product rationalization, supply chain improvement)." Citigroup maintains its Buy rating and has raised the price target from $17 to $19. Dell closed yesterday at $13.91.