Try telling

Dell

(DELL) - Get Report

it isn't a high-growth stock anymore. It's still trading like one, largely on the conviction that the company is well on its way to winning the current PC price war. But at these levels, it might be wise to exercise caution before signing off on the bullish story.

Improbably enough, despite both a vicious bear market for tech and a heavy slump in demand for personal computers, Dell continues to levitate. Yes, it's trading at about half of where it was a year ago. But check out its 2001 performance: a 50% gain, amid a 20% decline in the sickly

Nasdaq Composite

. And the trend may still have legs: Wednesday, with the Nasdaq plunging another 6%, Dell fell just fractionally, buoyed by the latest in a long string of bullish analyst notes on the company, this time from

Merrill Lynch's

Steve Fortuna.

Fortuna gave warning-weary investors what they wanted: He speculated that when Dell reports its fiscal first-quarter results in May it won't only make its target of 10% sales growth, but it could actually best that figure. In a time when competitors are struggling to get any growth out of their PC businesses, that's nothing to sneeze at. Fortuna also wrote that Dell's earnings per share have a "strong chance" of meeting the 17 cents a share consensus estimate as measured by

Thomson Financial/First Call

. (Merrill has done no recent underwriting for Dell.)

It's hard to imagine where Fortuna is getting his conviction. PC companies themselves have made no secret about their inability to predict where their businesses are heading in the near term. Dell's quarter doesn't end until April 28. And historically -- as Fortuna conceded in his note -- Dell does about 40% of its business in the last month of the quarter. In the current environment, that percentage could be even higher, as customers more concerned with expenses bide their time in hope of better prices.

But no matter. Fortuna's comments reinforce

the conventional wisdom on Wall Street that the PC industry's bad news is Dell's good fortune. Dell bulls became convinced early this year that the total evaporation of demand would ultimately work in the company's favor. The thinking: Dell's much-vaunted reputation for cost management allows it to slash prices much more aggressively than its competitors. Meanwhile, the gains Dell is able to make in PC market share could translate to increased sales in higher-margin businesses like storage and servers further down the road. Sure, profitability may suffer in the interim. But it won't suffer as badly as it will at Dell's competitors.

Recent events have only strengthened that thesis. Last week

Micron Electronics

(MUEI)

, having just hemorrhaged nearly $170 million in its fiscal second quarter, confessed that it couldn't hold its breath underwater any longer against the likes of Dell. Things were so bad that the company has decided to pretty much give away its ailing PC business to an obscure

Los Angeles buyout shop.

"I give them a lot of credit for setting the strategy for the entire PC industry by being the first and most aggressive to cut prices," said David Bailey, an analyst at

Gerard Klauer Mattison

, which hasn't done recent underwriting for Dell. "They forced all their competitors to play their game, and obviously, they're best-positioned to take advantage of a price war."

True enough. But how long can Dell keep up its levitation act?

Dell has had a remarkable 2001, clearly leading a sector that is so far off its highs that many regard it as a defensive investment. Still, the strong fundamental story at Dell is carrying a surprisingly dear price tag for a time in which high-multiple growth stocks are under heavy pressure from wary investors. At its current levels, Dell is trading at about 33 times its earnings estimates for fiscal 2002, a year in which analysts expect the company's earnings to decline about 5% from last year. And no matter what Merrill's Fortuna thinks about the current quarter, those estimates are more likely to come down than go up, if the recent trend should extend itself.

"Sure, they're driving revenues, but price cutting is pressuring margins and will continue to pressure margins," says Bailey. "For a company growing revenue at 10% to 15%, Dell's valuation is getting relatively rich."