DELL Downgraded to Strong Sell - Analyst Blog
10 April 2013 - 6:50PM
Zacks
On Apr 4, 2013, Zacks Investment Research downgraded
Dell Inc. (DELL) to a Zacks Rank #5 (Strong
Sell).
Why the Downgrade?
Dell has witnessed some downward estimate revisions after
posting mediocre fourth-quarter 2013 results. The company had
decided to go private to save itself from public and legal scrutiny
which was affecting its profitability. Moreover, due to the
impending recession in Europe, the company is not able to generate
much business from that region.
On Feb 20, 2013, Dell reported weak fourth-quarter results with
revenues and margins taking a big hit. Revenues across the entire
business declined over the past year.
The major challenge at the moment is the cannibalization of its
PC/notebook business. Moreover, the company is up against cutthroat
competition from Hewlett-Packard (HPQ) and
Apple Inc. (AAPL), as well as a restricted
spending environment. The competition faced by the company in the
SMB and server segments is also a concern.
Moreover, Dell’s Small & Medium Business (SMB) has not been
doing so well in the last few quarters. This segment was down 5.0%
in the fourth quarter, mainly attributed to the reduction in the
order renewal rate by the SMB client as economic conditions have
prompted conservative spending by customers, so they are either
deferring their purchases or looking for cheaper alternatives.
Although privatization might have helped Dell move away from
public scrutiny, the go-shop period raised new problems for founder
Michael Dell. It now appears that the privatization could be
delayed because of the interest shown by other parties.
The Zacks Consensus Estimate for 2014 decreased 5.7% to $1.65
per share over the last 60 days. For 2013, most of the estimates
were lowered in the last 60 days, which pulled down the Zacks
Consensus Estimate by 5.7% to $1.57 per share. Over the last 90
days, estimates for 2014 and 2015 dropped 6.4% and 1.8%,
respectively.
Dell operates in the IT industry and is a key player in the PC,
server and mobile computing segment.
Other Stocks to Consider
Most of the computing stocks are placed as poorly as Dell. We
however recommend Symantec Corp. (SYMC), which has
a Zacks Rank #2 (Buy). Synopsys Inc. (SNPS), which
carries a Zacks Rank #1 (Strong Buy) also looks attractive.
APPLE INC (AAPL): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
SYNOPSYS INC (SNPS): Free Stock Analysis Report
SYMANTEC CORP (SYMC): Free Stock Analysis Report
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