There are many great reasons to buy Dell Technologies (NYSE:DELL) stock, especially with the share price having pulled back in recent months.
Dell stock has fallen nearly 30% since it hit a 52-week high at the end of May this year. The share price declined after the company’s first-quarter financial results raised concerns about the profitability of Dell’s servers that are used to run artificial intelligence (AI) applications and models. Those concerns overshadowed what was otherwise a strong print from the company, which is benefitting not only from strong demand for its AI servers but also a global refresh cycle for its core personal computer (PC) business.
Despite the pullback since May, Dell stock is still up 140% over the last 12 months.
PC Market Rebound
In June, market research firm International Data Corp. (IDC) forecast a rebound for the personal computer (PC) market excluding China. Worldwide sales this year are likely to number more than 260 million units, according to the forecast. The rebound in PC sales is being driven by a new crop of computers that can run AI software., as well as the replacement of hardware and equipment purchased at the outset of the pandemic in 2020.
IDC said that AI-enabled PC’s share of the overall market will grow from about 20% this year to more than two-thirds (67%) in 2028. The firm added that it expects AI PCs will boost average selling prices and give a financial lift to computer manufacturers such as Dell. Excluding China, IDC said that PC shipments this year should increase 2.6% from 2023 levels. The firm sees a further tailwind in the second half of 2025 as demand in China recovers.
AI Demand
The rebound in global PC sales can only help give Dell Technologies’ stock a boost, especially as the company has announced that it is going all-in on AI-enabled computers. While Dell’s PC sales saw flat year-over-year growth in Q1 of this year, the company is forecasting a rebound in the second half. The company reports its Q2 earnings on August 29.
The company is also seeing huge demand for its AI servers. Dell said shipments of it’s AI-optimized servers rose more than 100% sequentially to $1.70 billion in this year’s first quarter. The company’s backlog of orders for it’s AI servers rose 30% during Q1 of this year to $3.80 billion. Dell has emerged as a leading vendor for AI servers, which are in high demand as companies invest in infrastructure to support generative AI applications. The company said AI server sales rose 42% to $5.50 billion in Q1 and that demand is strengthening.
Upgrades and S&P 500 Inclusion
In late June, investment bank Morgan Stanley (NYSE:MS) named Dell stock a “top pick” and said the company’s share price could rise 40% from current levels. Morgan Stanley is pounding the table on Dell stock and encouraging investors to take advantage of the share’s recent decline. Other analysts are also bullish on the stock and its prospects moving forward.
Currently, DELL stock has a consensus “strong buy” rating among 12 Wall Street analysts, along with a median price target that is 23% higher than where the shares currently trade. Analysts see plenty of tailwinds gathering for the company and its stock. Another catalyst for Dell stock could come from it possibly being added to the S&P 500 index later this year. Dell is currently the largest stock (with a market cap of $90 billion) that is not included in the benchmark index, and there are rumors it could be added in an upcoming rebalancing.
Being added to the S&P 500 would give Dell stock a boost as mutual funds and exchange-traded funds (ETFs) that track the index would be required to buy shares.
Buy Dell Stock
There are so many things working in Dell’s favor right now, it seems like a no-brainer for investors to take a position. Moving forward, the company should benefit from both surging demand for its AI servers and a global PC refresh cycle. Analysts are extremely bullish on the stock. Inclusion in the S&P 500 index would give the share price a further boost. With so much momentum behind it, investors shouldn’t hesitate to buy Dell stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
