Dell Technologies Inc. (NYSE:DELL) is a stock to watch in the computer hardware industry. Last week, it emerged that Dell’s peer in the industry, HP Inc., was added to Berkshire Hathaway’s portfolio. The move was due to potentially higher growth in the demand for PCs.
This week, it has emerged that companies in this industry have shipped more than 80 million despite supply chain challenges. Based on the information, we think that Dell would be a good portfolio candidate for value investors.
The company is currently trading at a valuation of $46.95, with signs of a declining trend. This comes after a Morgan Stanley downgrade from overweight to balanced or market portfolio. In reading the downgrade, it is important to highlight that the company maintained the price target at $60. There is consensus for a valuation above $54.
A little ratio analysis helps determine how fairly the stock is valued. At the price of $46.95, the PEG ratio stands at 0.59. The forward PE stands at 7.13. The two ratios point to a stock that is potentially undervalued by the market.
This is so despite the stock scoring a perfect A on both value and momentum indicators. We think that an F rating on growth does not capture new information on the need for households to have multiple PCs as working from home goes mainstream.
Dell may decline to $45 before rallying to $60
Source – TradingView
This analysis projects Dell stock may slightly decline to $45 before the market fully interprets the downgrades. At $45, the stock will hit RSI 30 and set a trend reversal that will see the stock rally to valuations between $55 and $60. By the next earnings call, the stock would indicate higher projected growth and valuation will rise above $60.
Dell is an important value stock to watch. Though the price may decline to $45, the stock is a buy. The valuation can be expected to rise above $60 as the company finds renewed growth.
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