Analyst Louis Miscioscia from Daiwa Capital Markets has raised his rating on computer maker Dell (ticker: DELL), citing improving demand. In a research note, Miscioscia upgraded shares of Dell to Outperform from Neutral and increased his price target to $80 from $50, implying a gain of 16% from the stock’s closing price on Monday.
According to Miscioscia, the demand slowdown that occurred since the second half of 2022 seems to be slowing down. He also highlighted two positive factors contributing to Dell’s long-term growth potential: improving macro tech demand and increasing sales in artificial intelligence (AI).
The Covid-19 pandemic initially boosted demand for personal computers as people shifted to remote work and online classes. However, this demand surge eventually declined, affecting many computer and chip manufacturers. Nonetheless, a recent report from market research firm IDC on Aug. 28 provides hope for better times. While consumer demand is facing challenges due to high inflation, PC shipments are forecasted to grow by 3.7% year over year in 2024.
Dell’s Chief Operating Officer, Jeffrey Clarke, mentioned on the company’s latest earnings call in August that commercial PC demand has been improving sequentially throughout the quarter.
Miscioscia also finds it encouraging that Dell is experiencing significant demand for its artificial intelligence solutions, particularly the PowerEdge 9680 server. Dell’s Chief Financial Officer, Yvonne McGill, also shared on the earnings call that there has been an expansion in server average selling prices (ASPs) and an increase in AI server revenue demand, driven by customer interest in generative AI solutions.
As a result of the positive news, shares of Dell were up by 1.1% at $69.89 on Tuesday, with a year-to-date jump of 74%.