Dell’s (NYSE: DELL) stock price is experiencing a downward trend as investors react to the company’s third-quarter financial results and forecasts for the future.
By the end of the last trading day, Dell’s shares stood at $141.74, marking a decline of 1.7%. This downward momentum persisted into pre-market trading on November 27, where the stock fell over 13%, dropping to $123. Nonetheless, Dell remains in positive territory for 2024, with nearly a 90% increase year-to-date.
Reasons for the DELL Share Price Decline
The drop comes despite Dell reporting third-quarter results that exceeded expectations and a optimistic outlook concerning its progress in artificial intelligence (AI). The technology company achieved earnings per share of $2.15, beating the anticipated $2.06. However, revenue totaled $24.4 billion, falling short of the projected $24.67 billion.
Dell also noted a significant surge in demand for traditional servers, spurred by a rise in orders for AI servers. These CPU-driven servers are oriented toward lower power consumption and assist in maximizing data center resources for AI-related investments.
Nevertheless, the forecast for the fourth quarter has alarmed investors. During the earnings call, Dell projected fourth-quarter revenues between $24 billion and $25 billion, which was below the estimated $25.57 billion.
Additionally, the stock is under pressure due to softened demand for Dell’s traditional PCs, coinciding with anticipated declines in server sales for enterprise customers who are postponing the purchase of new systems powered by Nvidia’s (NASDAQ: NVDA) cutting-edge Blackwell chips.
Wall Street’s Perspective on DELL Stock
Following the recent earnings report, Bernstein analyst Toni Sacconaghi retained an ‘Outperform’ rating for Dell, setting a price target of $140 while indicating mixed signals in the company’s outlook.
Sacconaghi pointed out that although Dell’s AI segment holds potential, delays in PC upgrades and AI server rollouts have adversely affected projections. Concerns remain regarding the firm’s dependence on Tier 2 cloud providers and possible scaling issues for the AI infrastructure.
Nonetheless, Sacconaghi believes that the growing AI pipeline can bolster the company’s long-term growth prospects despite these challenges.
“Dell’s Q3 results were somewhat disappointing. Revenues were slightly below consensus, and the company guided for Q4 revenues that were nearly $1B below Street expectations. Dell’s AI pipeline appears to have improved to $15-20 billion,” Sacconaghi stated.
Goldman Sachs has also affirmed a ‘Buy’ rating on Dell stock, raising its price target from $155 to $165. Despite a more pessimistic outlook for the fourth quarter, the firm pointed to the company’s robust third-quarter performance as a positive indicator.
As this situation unfolds, investors are closely watching how Dell positions itself in the AI landscape, looking for it to gain ground on leading competitors like Nvidia. In pursuit of this goal, Dell has begun reallocating resources to its AI initiatives, including workforce reductions, with outcomes expected in the upcoming quarters.
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