Dell Technologies (DELL) shares moved lower Friday after analysts at Goldman Sachs lowered their rating and price target on the PC maker, citing weakness in key markets and broader inflation pressures.
Goldman analyst Rod Hall said value from the group's spin-off of tis cloud computing division VMWare last year has already been unlocked, and weakness in PC markets, as well as a slowdown in corporate IT spending, were enough to remove Dell from Goldman's 'conviction buy' list. Hall cut his rating on Dell to 'neutral' and lowered his price target by $7, to $61 per share.
"We continue to believe Dell remains inexpensive compared to its peers, but we see increasing fundamental headwinds hindering this value unlock," Hall said. "We note that PC demand has already moderated for low end consumers, and we expect higher end demand to inflect by the end of this year."
"These demand trends could be exacerbated on the negative side by increasing pressure on the consumer economy driven by inflation," he added.
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Dell shares were marked 3.8% lower in early Friday trading to change hands at $48.27 each, a move that would extend the stock's year-to-date decline to around 14.2%.
Dell said earlier this year that it sees current quarter revenues slowing to between $24.5 billion and $25.7 billion, with earnings in the region of $1.25 to $1.5 per share, as supply-chain disruptions and chip shortages continue to extend completion times for PC making and deliveries.
Industry tracking firm IDC, meanwhile, said 2022 shipments of desktop monitors in the global PC market, where Dell has a 22.1% share, are likely to fall 3.6% this year as post-pandemic buying wanes and chip and supply shortages intensify.
"Looking ahead to fiscal year '23, we expect OpEx as a percentage of revenue to be slightly higher than fiscal year '22 and as we invest in the business, employees return to work, and we engage in more business-related travel," CFO Tom Sweet said on February 24.
"And We expect inventory balances to come down as the supply chain situation improves over the coming year," he added.
