BofA raises Dell stock price target to $155, maintains Buy rating

Dell reported strong Q1 2025 earnings, exceeding revenue expectations at $23.38B despite EPS falling short at $1.55, driven by robust AI server demand exceeding $12B in orders. Consequently, Dell raised its full-year EPS guidance by 15% to $9.40, prompting Morgan Stanley to increase its price target to $135 while maintaining an Overweight rating, although Barclays raised its price target to $123 with an Equalweight rating, citing gross margin concerns related to Blackwell rack scale systems. Analysts are optimistic about Dell's trajectory in the AI server market, citing beneficial product mix margins and anticipated PC refresh cycle demand.

Analysis

Dell Technologies Inc. (DELL) demonstrated robust performance in its first-quarter 2025 earnings, driven significantly by its AI server business. The company reported revenues of $23.38 billion, surpassing the $23.14 billion forecast and marking a 5% year-over-year increase, although earnings per share (EPS) of $1.55 fell short of the $1.69 estimate. A key highlight was the AI server segment, with orders surpassing $12 billion, underscoring strong market adoption. Consequently, Dell raised its full-year EPS guidance by 15% to $9.40. Analyst sentiment is largely positive, with BofA Securities noting early AI adoption, beneficial product mix margins, and an anticipated PC refresh cycle as tailwinds. Morgan Stanley increased its price target on Dell from $126.00 to $135.00, maintaining an Overweight rating, citing AI server strength as a buffer against enterprise sector concerns. Conversely, Barclays, while raising its target from $116.00 to $123.00, maintained an Equalweight rating, expressing caution over potential gross margin impacts from Blackwell rack scale systems. Dell's strategic partnerships with NVIDIA and Google further solidify its position in the AI market. The company's P/E ratio stands at 17.37, which, combined with strong growth prospects, presents a compelling, albeit nuanced, investment case.

Key Decisions for Investors

• Investors should closely monitor Dell's AI server order momentum and its conversion into sustained revenue and earnings growth, given this segment's critical role in the company's outlook.
• Consider the potential for gross margin pressure, particularly from new technologies like Blackwell rack scale systems, as a key risk factor highlighted by some analysts.
• Evaluate Dell's current P/E ratio of 17.37 in the context of its significant AI-driven growth prospects, the raised full-year EPS guidance, and the contrasting analyst ratings (Overweight vs. Equalweight) before making investment decisions.
• Watch for developments in the upcoming PC refresh cycle and the long-term adoption of AI in PCs, as these are anticipated to provide further tailwinds for Dell.