Dell Poised for Growth, Goldman Says

Updated stock price

NEW YORK (TheStreet) -- Cost cuts and a presumed PC buying cycle ahead earn Dell (DELL Quote) a buy rating at Goldman Sachs.

The computer giant is set to report its fiscal third quarter results Thursday and Goldman expects that solid sales will help boost Dell's top line by about $250 million above the $13.1 billion street consensus target.

Michael Dell

But it's the year ahead that has Goldman jazzed about Dell's prospects.

"Our checks point to an aged installed base and pent-up PC demand, giving us greater confidence in a PC refresh cycle in 2010 and driving our 12% unit growth forecast for Dell," Goldman analyst Dave Bailey wrote in a research note Sunday.

Dell had a rough year in 2008, ditching its direct to customer PC sales approach in favor of a retail push and a major shift to outsourced manufacturing. Meanwhile, rival Hewlett-Packard (HPQ Quote) expanded beyond hardware into services with the acquisition of EDS ,an IT management specialist.

The tide turned for Dell this year as investors cheered the possible turnaround of the No.2 PC shop. The stock is up 50% since the beginning of January.

Dell shares were up 2% to $15.73 in morning trading Monday.

-- Written by Scott Moritz in New York.