Melius Research analyst Ben Reitzes believes that Dell Technologies offers investors a highly underestimated opportunity to benefit from the rapid growth of artificial intelligence (AI). In his coverage initiation report, Reitzes assigned a Buy rating to the PC and enterprise hardware company, setting a target price of $95. This implies a potential gain of nearly 30% for investors. While Dell’s shares currently trade at $73.42 (down 0.2% in afternoon trading), Reitzes predicts that the company’s product portfolio will experience an “AI halo effect” in the coming months, driving increased sales of PCs and servers.
Despite witnessing a remarkable 80% rally this year, Dell’s stock still boasts an attractive valuation, with a forward earnings estimate at just 11 times the consensus forecast. This presents an excellent opportunity for investors, especially considering the potential for a PC upgrade cycle and Dell’s focus on AI-focused servers.
According to Reitzes, Dell has positioned itself as a key player in the AI industry by offering comprehensive solutions encompassing hardware, software, and services. The company is swiftly optimizing its server lineup to handle AI workloads and integrating AI capabilities throughout its software portfolio. Additionally, Dell has aligned itself with leading AI semiconductor companies such as Nvidia, Advanced Micro Devices (AMD), and Intel.
Furthermore, Reitzes expects an upsurge in demand for personal computers, primarily driven by Microsoft’s planned termination of support for Windows 10 in 2025. This move is anticipated to accelerate the replacement cycle for enterprise PCs. Over the long term, all aspects of Dell’s business, including PCs, servers, and storage, are poised to benefit from the rise of Generative AI applications as processing shifts towards the edge.
In conclusion, Dell Technologies stands out as a structural share gainer with a superior scale and a highly accomplished management team. Given the company’s strategic positioning in the AI market, investors should consider Dell as a sustained premium investment opportunity compared to its peers.