Dell Stock Is Tops in S&P 500 Today. Wall Street Likes Its Long-Term AI Plans.

Dell’s growth potential in AI servers is the reason its targets look feasible, writes Melius Research analyst Ben Reitzes. (Courtesy Dell Technologies)

Key Points

• Dell Technologies increased its long-term annual revenue growth target to 7% to 9% and adjusted earnings per share growth to 15% or better.
• Dell shares rise sharply Wednesday and reach a 52-week high.
• Analysts cite Dell’s strong potential in artificial-intelligence servers and on-premises generative AI adoption as reasons for increased price targets.

Dell Technologies was the top-performing stock in the S&P 500 Wednesday as Wall Street digested the company’s updated financial guidance.

Before markets opened Tuesday, Dell boosted its long-term target for annual revenue growth to between 7% and 9%, up from a previous range of 3% to 4%. The company also lifted its adjusted per-share earnings growth target to 15% or better, almost double its prior forecast of 8%.

Dell shares gained 3.5% on Tuesday to reach a new 52-week high and were up another 6.7% to $161.04 on Wednesday. The stock was on pace for its highest close since May 30, 2024, according to Dow Jones Market Data.

Several Wall Street firms raised their price targets on Dell on the back of its new outlook, citing the strong growth potential of the company’s artificial-intelligence servers.

While Dell is seen mostly as a personal computer and server vendor, the company’s “ability to grow faster in AI servers, attach services and see increased enterprise adoption” is the reason the company’s ambitious targets look feasible, wrote Melius Research analyst Ben Reitzes.

Around 85% of businesses are planning to move their generative AI workloads on-premises within the next two years, Reitzes said. This transition should mean significant information-technology investments that align with Dell’s portfolio of hardware, software, and services.

Melius reiterated a Buy rating on Dell and boosted its price target to $200 from $172.

Vijay Rakesh of Mizuho Securities thought Dell’s new targets may be conservative given its widespread involvement in “at-scale AI deployments.” The company remains the overall leader in the server industry, claiming around 12% of the market last year, giving it a strong platform to see incremental growth through AI-specific server deployments, Rakesh noted.

The firm maintained an Outperform rating and lifted its target price to $170 from $160.

“Dell presented a solid plan for achieving 15% annual EPS growth in a manner this is basically already expected by the Street,” agreed Steven Fox of Fox Advisors, who reiterated an Equal-weight rating in a research note Wednesday.

“We think the meeting should put a solid floor in the stock around current levels,” Fox continued.

For now, shares are looking for their new ceiling.

Write to Nate Wolf at nate.wolf@barrons.com