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Dell Stock Price has Limited Upside Potential

dell stock price

Dell (NYSE: DELL) stock price tumbled following lower than expected results for the third quarter. In addition, a lower outlook for the full year is likely to create a negative impact on investor’s sentiments.

Its shares are down more than 19% from 52-weeks high that it had hit five months ago. The stock price is currently trading around $53, up slightly from a 52-weeks low of $45 a share.

Dell Stock price

The market analysts are blaming Dell’s management for not transforming their business model according to market trends. However, the management is now seeking to make big changes in their entire product portfolio.

Q3 Performance Limits Dell stock Price Upside

Its third-quarter revenue of $22.93 billion missed the consensus estimate by $100 million. Moreover, its revenue grew by 2% from the previous year period.

Its Infrastructure Solutions Group revenue of $8.39B remains light from the consensus of $8.63B. The Client Solutions Group revenue of $11.41B also missed the consensus estimate while VMware revenue topped the consensus of $2.41 billion.

Dell Technologies is innovating and integrating solutions across our entire portfolio to create the technology infrastructure of the future for our customers,” said Jeff Clarke, vice chairman, Dell Technologies.

Dell Stock Price

On the positive side, Dell’s third-quarter earnings remain robust. Its Q3 non-GAAP operating income grew 18% year over year to $2.4 billion.

The cash flow generation was strong enough to cover capital investments and dividends. It generated $1.8 billion in third-quarter operating cash flows. It returned almost $2 million to investors through share buybacks.

Bleak Outlook Could Keep Shares Under Pressure

The company has lowered its revenue and earnings outlook for the full year. It now expects fiscal 2020 revenue in the range of $91.8B-$92.5B, short significantly from the consensus for $93.5B.

The adjusted EPS is likely to stand around $7.25-7.40. Slower revenue growth along with big restructuring actions could create pressure on its financial numbers in the short-term. Therefore, Dell’s stock price is also likely to remain under pressure.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.