Friday, August 28, 2009

Reactions to Dell's earnings report (DELL)

AlphaNinja - Dell's results last night were pretty good - a high quality beat on revenue, gross margins and earnings.

The shares are up 2.5% today, while the broad market is down almost a percent.

Street reactions, courtesy of

-->>Kaufman notes Dell's Q2 reported last night was decent and thinks its preannounced miss in mid-July turned out too conservative; was effective in setting expectations lower. They note they beat ex-"organizational effectiveness" which adds quality to the earnings. They note gross margins improved to 18.7% from 18.1% QoQ and reversed a trend of deterioration over the last two quarters. They find this impressive and it looks like all major PC vendors including HPQ, AAPL, and Dell have managed margins well in a tightening component environment. They have raised ests, still below consensus for FY11 and have raised their tgt to $13 from $11. They do not find its valuation compelling vs HPQ and AAPL (ex net cash). They continue to believe DELL needs to take bigger and bolder steps to position itself for sustainable success...

-->>Deustche Bank notes that with these results in the rear-view mirror, they expect investors to increasingly focus on the Win 7 PC upgrade opportunity; they expect further multiple expansion as the Win 7 launch approaches and visibility on PC fundamentals crystallizes. They have raised their tgt to $20 from $15... Credit Suisse notes DELL's quarter had clean upside, with surprisingly strong gross margins and cash flow. They note the two key near-term bear arguments for the stock-gross margins and cash flow-were countered by the July quarter results. They continue to believe the PC market will enjoy a solid corporate refresh cycle in calendar '10, largely due to the rising maintenance costs of legacy PCs. Dell's heavy corporate exposure positions it well in this respect. They note corporate spending trends and demand from Asia will be key catalysts; they raise their tgt to $19 from $16...

-->>UBS notes Dell should benefit from the desktop refresh cycle (they feel may still be overstated). Near-term, they believe Dell will continue to see lumpiness in rev & margins as it continues to transition, its end markets continue to see pressure, and as it continues to invest into growth markets & channels. They have raised their tgt to $16 from $14.50; they reiterate their Neutral rating.

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