Light At The End Of The Tunnel: After A Disappointing Quarter, Dell Has Upside Potential

Dell Inc. (DELL) reported its quarterly results yesterday, missing earnings and revenue estimates. The performance of the PC business was below par, but Data Center product revenue gives hope for the future of the company. The Enterprise segment is characterized by high margins, in contrast to the PC segment where Dell faces a year-over-year shipment decline of 13.7%. The company still has approximately $4.2 per share in net cash and is trading at around $9.5. Therefore, we believe Dell has very limited downside and the growth in its Enterprise Solution segment is a positive sign. We are giving a buy rating to Dell, and believe that these results indicate that HP (HPQ) will miss its earnings estimates of $1.14.

We maintain our buy rating on Dell despite an abysmal quarter due to limited downside potential. We also like its encouraging performance in the Enterprise Solutions segment, cheap valuation (forward P/E of five times), and the positive effect expected from Windows 8 on future PC sales.
Find more about it.