Dell’s Continued Strength in PC Shipments Could Raise Stock Outlook

Dell (NASDAQ:DELL) is known for its product line of desktop and notebook PCs as well as its printers and PC displays. Dell primarily competes with HP (NYSE:HPQ) and Acer (TPE:2353) at the top end of the PC market. ^[1], as well as IBM (NYSE:IBM) and others in the IT services business.

We currently have a $19.25 price estimate for Dell’s stock, which is well ahead of market value. We estimate that notebooks and netbooks constitute nearly 18% of the company’s stock value.

We previously discussed Dell’s recent PC market share gains at the expense of top competitors like HP and Acer (See Dell Could Draw Upside From Notebook PC Market Share). Strong results from Dell’s most recent earnings indicate a continuation of the trend, adding further upside potential to Dell stock.

Dell Becomes the Second Largest PC Vendor

In Q4 2010, Dell became the second largest PC vendor, jumping ahead of Acer which recorded notable sales declines in part due to weak sales of Mini Notebook PCs. Dell, on the other hand, saw strong emerging market sales that helped establish 4.2% year-over-year (YOY) growth from December 2009. ^[2] Dell was previously ranked 3rd among PC vendors during Q3 2010. ^[3]

Upside Potential to Dell

We currently estimate that Dell’s notebook and netbook market share will remain roughly flat between 11% and 12% through our forecast period. However, the recent trend of positive PC shipments for Dell vs. its top competitors could create upside to our base forecasts, which already imply a substantial valuation premium to market price. We note that IDC’s reported PC shipments includes desktops as well as notebooks and netbooks.

However, tablets could threaten this upside. Overall PC shipments increased only 2.7% YOY during Q4 2010, vs. prior estimates of 5.5% growth. ^[2] While YOY growth in PC shipments is encouraging, the miss vs. projected shipments indicates an accelerating impact from increasing popularity of tablet devices.

With a flurry of media tablets lined up for launch in 2011, the PC shipments could take a hit as consumers are lured by the new products.

Drag the trend lines in the modifiable charts above to see how various trends in the global notebook and netbook market could affect Dell’s stock value.

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See our complete analysis of Dell’s stock here.

1. Global PC Market, IDC [↩]
2. PC Market Records Modest Gains During Fourth Quarter, Businesswire [↩] [↩]
3. Global PC Market Maintains Double-Digit Growth in Third Quarter Despite Weak Results in Some Segments, IDC [↩]