
Deutsche Bank Reinitiates Coverage of Dell with a Buy Rating on Optimistic Growth Outlook
Deutsche Bank has reinstated its coverage of Dell Technologies with a Buy rating and a price target of $144, indicating a potential upside of approximately 14% from current levels.
The firm’s optimistic outlook rests on three key factors.
Firstly, analysts anticipate that Dell will see a significant acceleration in revenue growth, reaching double-digit percentages in the coming quarters. This growth is expected to stem from positive trends in key areas such as servers, storage, and commercial PCs, where Dell maintains a strong market position.
The Infrastructure Solutions Group (ISG), contributing about 45% of Dell’s revenue, is projected to benefit from ongoing demand for AI servers and a recovery in traditional servers and storage solutions. Analysts emphasize that Dell is well-positioned to leverage upcoming growth in AI across enterprises, thanks to its extensive product portfolio, diverse services, and broad market presence.
Secondly, the bank predicts double-digit growth in Dell’s net earnings in the years ahead. This forecast is backed by anticipated revenue increases and effective management of operational expenditures, which are expected to mitigate any short-term gross margin pressures. Deutsche Bank sees Dell’s earnings per share (EPS) growing at a 14% compound annual growth rate (CAGR) from fiscal years 2025 to 2028, which is above Dell’s own long-term targets.
Lastly, Dell’s capital allocation strategy has garnered praise for its transparency and commitment to returning a significant portion of its free cash flow to shareholders. Analysts estimate that adjusted free cash flow will rise from $4.8 billion in the current fiscal year to $7.4 billion by 2028, with about 85% of that being returned to shareholders through dividends and stock buybacks.
Currently, Dell pays a dividend of $1.78 per share, providing a yield of 1.5%, and share buybacks are expected to reduce the share count by roughly 6% over the next three years.
Additionally, it’s important to note that this comes from a solid financial position, with core leverage at 1.4x as of the last quarter, close to the long-term target of approximately 1.5x.
In 2024, Dell’s shares have appreciated more than 65%, significantly outperforming the broader market.