Analyst Note| William Kerwin |
We maintain our $46 fair value estimate for no-moat Dell Technologies after they reported second-quarter fiscal 2024 results that crushed guidance but still show the firm in a challenging spending environment overall. Dell’s core businesses have undergone a deep cyclical downturn which appears to have troughed based on fiscal second-quarter results and third-quarter guidance. While we expect a recovery to come, we believe it will be gradual and with fits and starts. Dell is benefiting more than we anticipated from artificial intelligence server demand, showing an ecosystem of AI applications below the hyperscale cloud customers. Nevertheless, the PC market continues to be the largest contributor to results. We think the AI hype has sent Dell’s valuation above its fundamentals and we see shares as overvalued.