Investment bank Morgan Stanley (MS) has named Dell Technologies (DELL) stock a “top pick” and says the company’s share price could rise as much as 40% from current levels.
Morgan Stanley is encouraging investors to take advantage of Dell stock’s decline since the company reported its financial results at the end of May.
While Dell’s results beat Wall Street forecasts across the board, concerns were raised about the profitability of the company’s emerging artificial intelligence (A.I.) server business.
Those worries sent Dell stock down nearly 30%, although the share price has begun to recover. Morgan Stanley says investors should treat the drawdown as a buying opportunity.
Analyst Erik Woodring has reiterated an “overweight” buy equivalent rating on Dell stock and called the laptop computer maker a “top pick.”
Woodring has placed a $155 U.S. price target on Dell stock, although he says the share price could reach $200 U.S., which would be 40% higher than where it currently trades.
The bullish outlook from Woodring comes after he met with Dell’s management team at the company’s headquarters in Texas.
Woodring came away from the meeting believing that Dell’s momentum with A.I. servers should accelerate in coming quarters.
Dell reported that its backlog of orders for A.I. servers rose 30% sequentially to $3.8 billion U.S. in this year’s first quarter. Revenue from the servers was up 42% in Q1.
Woodring adds that Dell’s personal computer (PC) business is “well positioned to outperform the market,” with accelerating sales likely this year and next.
“We’d take advantage of recent post-earnings underperformance to ‘buy the dip’ on a leading AI infrastructure player trading at a relative discount to peers,” wrote Woodring in his analysis.
Dell’s stock rose 5% on news of Morgan Stanley’s bullish outlook. The company’s stock has now risen 90% this year and trades at $142.03 U.S. per share.
