Dell Technologies Earnings: PC and Server Markets Still Look Soft; We See Shares As Overvalued

We maintain our $46 fair value estimate for shares of no-moat Dell Technologies after mixed fiscal third-quarter results. Sales missed management guidance, but profitability outperformed. Overall, we see Dell’s primary businesses of data infrastructure and PCs still mired in an environment of weak spending by customers. After striking a bullish tone after the July quarter, Dell management took a decidedly more conservative outlook in guiding to the January quarter and beyond. We’d believed prior expectations for a serious rebound after the fiscal second quarter were overly optimistic. Since strong July-quarter results and guidance, Dell’s stock has risen 35%, which we saw as unjustified against our more tepid forecast. We continue to project a modest rebound in fiscal 2025 (roughly equal to calendar 2024) and believe shares are overvalued.