Dell's Report Gives It Some Lift
Updated from Aug. 14
Dell shares gained 83 cents or 2.6% to $32.22, a day after delivering another quarter of double-digit sales and profit growth.
On Thursday Dell (DELL) said it had hoisted sales in its latest quarter by a robust 16% from last year's levels, lifting net income an even sturdier 24%. As a bonus, it guided for sales above Wall Street's expectations in the quarter now underway.
The computer hardware maker now has met or beaten Wall Street estimates for 10 successive quarters in a row.Dell's strong showing prompted A.G. Edwards to upgrade its rating to a buy from a hold, citing Dell's solid bottom-line growth in the midst of broader IT sluggishness. Analyst Shebly Seyrafi tagged the shares with a price target of $38 based on discounted cash flow analysis. Among other inputs, his analysis assumes Dell can push up its operating margin to 9.3% from the current 8.6% (which is in itself an increase from an operating margin of 8% in last year's second quarter). Seyrafi also assumes that over the next 10 years, Dell's revenue growth will gradually slide from 15% to 5%. A.G. Edwards hasn't done banking for Dell. Meanwhile, U.S. Bancorp Piper Jaffray nudged up estimates for Dell in the current fiscal year 2004, increasing his revenue outlook to $41.1 billion from $39.8 billion and EPS to $1.01 from $0.98. But the bank sounded a note of caution for investors thinking of buying into Dell. "While the stock remains a core technology holding, we would be more aggressive on pullbacks," wrote analyst Ashok Kumar. "PCs could record subpar aggregate demand for the forseeable future." One or more affiliates of U.S. Bancorp has recently provided commercial banking services to Dell. To be sure, investors initially reacted to Dell's report with a distinct lack of enthusiasm, pushing the shares down slightly in after-hours trading following the release of its second quarter results on Thursday. "The reality is the bear call on the stock has been
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