DELL Shares Sink 8.9% In A Day, Now Is Not The Time To Buy The Stock

We believe there are a few things to fear in DELL stock given its overall Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Unattractive. Here is our multi-factor assessment.

But no matter how attractive, investing in a single stock carries high risk. Trefis High Quality Portfolio and is designed to reduce stock-specific risk while giving upside exposure

Let’s get into details of each of the assessed factors but before that, for quick background: With $85 Bil in market cap, Dell Technologies provides desktops, workstations, notebooks, displays, software, and peripherals, and supports hybrid cloud, modern applications, networking, security, and digital workspace solutions.

[1] Valuation Looks Moderate

This table highlights how DELL is valued vs broader market. For more details see: DELL Valuation Ratios

[2] Growth Is Inconsistent

• Dell Technologies has seen its top line shrink at an average rate of -2.4% over the last 3 years
• Its revenues have grown 7.7% from $90 Bil to $97 Bil in the last 12 months
• Also, its quarterly revenues grew 5.1% to $23 Bil in the most recent quarter from $22 Bil a year ago.

This table highlights how DELL is growing vs broader market. For more details see: DELL Revenue Comparison

[3] Profitability Appears Very Weak

• DELL last 12 month operating income was $6.5 Bil representing operating margin of 6.7%
• With cash flow margin of 6.5%, it generated nearly $6.3 Bil in operating cash flow over this period
• For the same period, DELL generated nearly $4.6 Bil in net income, suggesting net margin of about 4.8%

This table highlights how DELL profitability vs broader market. For more details see: DELL Operating Income Comparison

[4] Financial Stability Looks Strong

• DELL Debt was $29 Bil at the end of the most recent quarter, while its current Market Cap is $85 Bil. This implies Debt-to-Equity Ratio of 34.2%
• DELL Cash (including cash equivalents) makes up $7.7 Bil of $87 Bil in total Assets. This yields a Cash-to-Assets Ratio of 8.9%

[4] Downturn Resilience Is Moderate

DELL saw an impact slightly better than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• DELL stock fell 44.4% from a high of $60.77 on 9 February 2022 to $33.77 on 12 October 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 September 2023
• Since then, the stock increased to a high of $179.21 on 29 May 2024 , and currently trades at $122.15

 
2020 Covid Pandemic

• DELL stock fell 45.9% from a high of $26.87 on 19 February 2020 to $14.54 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 29 June 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read DELL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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