Dell Inc. (NASDAQ:DELL) has maintained its ‘Buy’ rating from analysts at Bank of America (BofA) Securities but with a higher price target thanks in part to artificial intelligence (AI) tailwinds buffeting its business.
At its Security Analyst Meeting (SAM) in New York City, which featured presentations from CEO Michael Dell and CFO Yvonne McGill, the analysts noted that the company committed to returning more than 80% of annual free cash flow (FCF) to shareholders, higher than their expected 70-80%, while maintaining a target of over 100% net income to FCF conversion.
The company is also targeting 10% plus growth in its dividend per share annually through its 2028 financial year, while its earnings per share growth target was raised to a compound annual growth rate of over 8%.
“We see targets as conservative and beatable,” the analysts wrote in a client note.
The analysts noted AI tailwinds in both Dell’s Infrastructure Solution Group (ISG) and Client Solutions Group (CSG) units.
The company expects more of the training and inference phases of the AI/LLMs (Large Language Models) to be done on premises. Higher compute and storage requirements for AI/LLMs will drive richer configurations for PCs supporting revenue per unit twice that of competitors, in some cases, per Dell management.
“We reiterate buy on DELL given higher capital returns, AI tailwinds, and improving FCF benefiting from negative cash conversion cycle as PC revenue continues to grow.”
The BofA analysts raised their price target for Dell to $76 from $70.
The company’s shares were down 0.6% at $66.01 ahead of the opening bell on Monday.
Contact the author at stephen.gunnion@proactiveinvestors.com