Shares of Dell (NASDAQ:
) traded higher on Monday, up over six percent in early trading.
The move brought Dell back above the $10 per share mark, a
notable level it had broken below in recent sessions.
The catalyst behind the bullish move may have been an upgrade
from analysts at Goldman Sachs.
In a note published Sunday,
Goldman upgraded the PC-maker to Buy
. The upgrade was aggressive, given that Goldman had previously
had a Sell rating on Dell. Goldman's price target is now $13 per
In the note, Goldman's analysts argue that the bear case for
the stock -- the secular decline of the PC market -- has largely
been baked-in at current levels. Further, they like the company's
cash balance, which they believe will shield the stock from
further downside pressure, and could allow for a leveraged
Also, with the stock turning in such a poor performance in
2012 (shares are down over 27 percent), Goldman believes that
forward earnings estimates have been lowered enough so as to
provide upside potential.
Goldman's buy call is all the more notable given the
performance of its sell call.
Goldman had downgraded Dell to a Sell way back in December of
2010. Although the call was initially unprofitable, the situation
at Dell quickly deteriorated, and shares are down over 30 percent
Dell has been facing a secular decline in its business. Since
) first unveiled the iPad in 2010, mobile devices have become an
increasingly popular way to access the internet.
This has pressured Dell, as demand for its PCs have declined.
The company has recognized this shift, and has attempted to focus
more on business customers rather than consumers. Still, even
with the stated shift in strategy, Dell's shares have fallen as
earnings have failed to live up to expectations.
Hedge fund manager Jim Chanos stated earlier in the year that
he was shorting shares of Dell, calling the company a value
Chanos also targeted Dell's PC rival Hewlett-Packard (NYSE:
), which was facing similar pressures. H-P's problems may prove
to be a bit worse than Dell's, however, as the company recently
took a nearly $9 billion accounting charge related to its 2011
purchase of Autonomy.
Shares of Dell traded near $10.20 on Monday.
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