This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

PCs Are Dead, Death Knell for Dell

NEW YORK ( TheStreet) -- Almost every day the headlines read "The PC is Dead." I want to add "...and so is Dell (DELL)." This stock shows that professional investors are sometimes wrong about the investment quality of a stock.

As I have said, for a stock to be a long-term investment that has a place in a conservative retirement account, it should have a forecast of at least 10% increases in revenue, earnings and total return. Anything else is a speculative situation that should be traded on technical analysis. Let's look at what I mean.

In the past nine months, Dell has had one bad earnings report after another and investors are leaving in droves. Just look at this graph provided by Barchart showing price against the 20-, 50- and 100-day moving averages and the 14-day turtle channels:

Do you think owning this stock would improve your portfolio returns? Let's look at the numbers.

Factors to consider (Technical indicators provided by Barchart.): The stock has a 90% Barchart technical sell signal and a Trend Spotter sell signal. The stock trades below its 20-, 50- and 100-day moving averages, lost 10.31% in the last month alone and trades 47.93% off its one-year high. The Relative Strength Index is a weak 31.42% and it recently traded at $9.55, which is below its 50-day moving average of $10.96.

Fundamental factors: Wall Street has always been interested in the company's numbers and 26 brokerage firms have assigned 33 analysts to make recommendations. They project sales to be down 7.20% this year and recover by only .20% next year.

Earnings are estimated to decrease by 17.80% this year and recover by only 2.30% next year. A 4.53% annual total earnings increase is forecast for the next five years. The P/E ratio is 4.88 compared to the 15.30 P/E of the market, the dividend rate of 3.31% is about 25% of projected earnings and higher than the 2.30% dividend rate of the market. The company manages to maintain an A financial strength rating.

Analysts think that if their projections are correct, investors should see an annual total return in the 25% to 29% range mostly from an increase in the P/E ratio, not necessarily from increases in revenue and earnings.

TheStreet gives the stock a weak C rating. The company is trying to turn its battleship and change the product mix to be less PCs and more networking and server products but competition is high. The only bright spot is lower earnings will drop the company's tax rate.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
AAPL $95.03 -2.90%
HPQ $12.57 -1.49%
IBM $147.07 -2.30%
FB $116.73 7.20%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs