Earnings: RBC Forecasts Choppy Results For Dell This Thursday

Dell Technologies (DELL) is set to report its F1Q21 results this Thursday after market close. Going into the print RBC Capital analyst Robert Muller has reiterated his DELL hold rating with a price target of $42, suggesting shares could pullback a further 2.5%. So far the stock has dropped 16% year-to-date.

“While we view consensus expectations as reasonable, we expect Dell to report choppy results through FY21 given supply and demand disruptions related to COVID-19” Muller explains.

Recent data points suggest difficulties in Dell’s primary standalone profit engine (ISG), says Muller, adding that he will be listening for commentary surround supply chains and backlogs. “We remain Sector Perform-rated on Dell largely due to its high debt burden, especially given the current macro environment” the analyst writes.

Turning to the numbers, Muller is forecasting revenue of $20.9B, EPS of $0.95 and Adj. EBITDA of $2,174MM vs. consensus of $20.7B, $0.93, $2,184MM respectively.

For FY21, he is now expecting $89.7B in revenue, alongside EPS of $5.06 and Adj. EBITDA of $9,842MM vs. consensus of $87.8B, $5.03, $9,939MM respectively. The analyst cites a more difficult near-term Server & Storage environment due to supply constraints and Covid-19 weakness as behind his lower numbers.

On March 26, Dell withdrew its previous FY21 guidance of $92-95B/$5.90-6.60 for revenue/EPS and Dell is unlikely to reinstate guidance, says Muller.

He notes that Hewlett Packard (HPE) posted declines of (20%) and (18%) for its Compute and Storage segments, respectively, during the April quarter due to supply constraints and Covid-19 market uncertainty, “which we view as a solid read thru for Dell’s ISG business.”

Overall, analysts are divided 50/50 on Dell stock, with 5 recent buy ratings vs 5 hold ratings. The average analyst price target, at $46, translates into upside potential of 6% from current levels. (See DELL stock analysis on TipRanks).

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