The landscape of computer hardware manufacturing has always witnessed extreme competition. However, no discussion around this competitive market can be deemed completed without mentioning Dell Technologies Inc. (NYSE: DELL), one of the undisputed leaders in the sector. Recently, Dell has been on a bullish climb, raising questions about whether this is the right time for potential investors to enter.
Analyzing the Catalysts Behind the Bullish Climb
Several factors have contributed to Dell’s recent success in the market. One significant catalyst is the restructuring efforts undertaken by the company. Dell has been working tirelessly to improve its balance sheet and streamline operations, subsequently enhancing its profitability. The company separated from VMware, which reduced its debt considerably and created a more robust independent company that is nimbler to respond to market changes.
Additionally, Dell has been successful in capitalizing on the increase in demand for personal computers (PCs) and laptops prompted by the move towards remote working due to the global COVID-19 pandemic. The company has reported impressive performance in its Client Solutions Group (CSG), recording growth in revenue from consumer and business PCs.
Judging The Growth Prospects
The market trends suggest that the remote work culture is here to stay, even after the pandemic wanes off. This presents a lasting growth opportunity for Dell, given its strong foothold in the PC market. Alongside this, Dell is actively gaining ground in high-growth areas like hybrid-cloud environments, edge computing, and telecom, offering solid growth potential.
Additionally, the company’s focus on trying to develop as-a-service offerings for hardware and software is a promising growth avenue. Dell’s project Apex aims to deliver storage, servers, networking, hyper-converged infrastructure, PCs, and broader solutions as-a-service. The increasing demand for such services is set to bolster Dell’s growth in the future.
Analyzing Stock Valuation
Despite the exceptionally strong growth prospects and robust financial health, Dell’s stock seems undervalued. The company boasts a forward price-to-earnings ratio of less than 10, well below the S&P 500 average, which is above 25 as of August 2021. This apparent undervaluation, followed by an attractive dividend yield, further makes Dell’s stock an appealing investment.
Ascertaining the Risks
However, prospective investors should note the possible risks associated with Dell’s stock. The global semiconductor shortage and the potential decline in demand for PCs post-pandemic could impact Dell’s performance