Dell shares were up 21.3% on Friday, their best day since the company returned to the public market in 2018. The rally came after a better-than-expected earnings report, driven by a bigger revenue increase.
The maker of IT hardware and infrastructure technology said sales fell 13% from a year earlier to $22.9 billion, above the average analyst estimate of $20.9 billion, according to Refinitiv. Adjusted earnings per share of $1.74 exceeded the average analyst estimate of $1.14.
Dell traded at $68.59 as of Friday afternoon. It is headed for its biggest gain and highest close since the company re-listed its stock five years ago. Dell was privatized in 2013 by founder Michael Dell and a group of private equity firms.
In addition to its improved earnings report for the latest quarter, Dell also raised its forecast for the year. The company now expects full-year sales of between $89.5 billion and $91.5 billion, representing a 12% year-over-year decline in the middle of the range. Dell was earlier seeking a drop of around 15%.
Despite the decline in revenue, Morgan Stanley on Friday named Dell its top IT hardware pick, replacing Apple. Dell is “emerging as an early Generative AI winner,” the firm wrote in a report, referring to the latest developments in artificial intelligence.
Morgan Stanley believes Dell is benefiting from growing demand for artificial intelligence servers as more companies focus their spending on that corner of the hardware market. Analysts have given a Buy recommendation on the stock and raised the price target to $70.
“Zen is the first company in our coverage to directly benefit from the AI spending cycle,” the analysts wrote, pointing to Dell’s disclosure of a $2 billion backlog of AI servers.
Morgan Stanley maintained an overweight rating for Apple but noted the risks of increased regulation around the App Store.
Prior to Friday, Dell’s biggest one-day gain since 2018 was a 14% increase in March 2020, according to FactSet. Its previous record closing price was $60.77 in February this year.
Correction: The headline of this story has been updated to reflect that Dell returned to the public market in 2018. The year is misspelled in the previous title.
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