Dell Technologies (NYSE: DELL) remains an exciting prospect despite its longevity in the industry. The company's recent partnership with Nvidia to support Elon Musk's xAI venture marks a pivotal moment for Dell. Over the past year, Dell's stock has soared from a 52-week low of $48.74 to a high of $179.70, fueled by the demand for artificial intelligence (AI) hardware.
The Latest on Dell
Dell's latest fiscal first-quarter results revealed mixed signals. While revenue rose 6% year-over-year to $22.2 billion, the company's gross margin declined by 250 basis points. This drop in margin, attributed to inflation and competitive pressures, led to a dip in the stock price post-earnings. However, Dell's IT infrastructure business remains a bright spot, with a 22% year-over-year growth, contributing $9.2 billion to the top line. This segment, driven by AI-enabled hardware, now accounts for over 40% of Dell's sales, up from 36% a year ago.
Zooming Out
Dell claims to have the most extensive portfolio of AI-enabled hardware. Their robust supply chain, sourcing semiconductor chips from multiple vendors like Nvidia and AMD, ensures a steady flow of components critical for AI solutions.
Despite a recent gross margin dip, Dell's strong free cash flow (FCF) of $5.5 billion over the trailing 12 months provides a solid financial cushion. In Q1 alone, Dell generated $623 million in FCF, easily covering its dividend payments of $336 million. This financial strength has allowed Dell to commit to a 10% annual increase in dividends through fiscal 2028.
Supercharged by Elon Musk
Dell's partnership with Nvidia to support Elon Musk's xAI venture has already boosted Dell's stock. The two companies are set to build the servers needed to power Musk's supercomputer. Dell CEO Michael Dell announced the collaboration, highlighting their role in assembling half of the supercomputer racks.
Analyst Expectations
Market analysts are bullish on Dell, with a consensus overweight rating and a median share price target of $162. The company's commitment to growing its AI-optimized product sales and recovering its PC division are key drivers behind this optimism. Dell's fiscal 2025 sales forecast of at least $93.5 billion, up from $88.4 billion in fiscal 2024, underscores this growth trajectory.
While Dell may not be the newest player in the tech arena, its strategic bets on AI and solid financials make it a compelling stock to watch.
Sean Kelland does not have positions in this company. Stocks.News has positions in Dell.
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Financial Commentator
Sean Kelland is a financial commentator with a keen interest in the intricate interplay between geopolitical movements and market dynamics. With a sharp eye for curating leading analyst insights, Sean delivers timely and impactful financial content that navigates the complexities of the global market. Drawing on his extensive experience in content creation and writing, he provides readers with val...