DELL - Embedded Expectations Analysis - 2021 10 12
Dell Technologies Inc. (DELL:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) earnings, with an 11.2x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about market share gains, supply chain constraints, and CSG and ISG demand.Specifically, management may lack confidence in their ability to sustain commercial client and storage share gains, maintain momentum in the midrange storage segment, and post more record quarters considering pandemic-related headwinds. Furthermore, they may be exaggerating their ability to leverage their industry-leading scale and differentiated supply chain, as well as effectively manage supply chain constraints, particularly for trailing nodes parts off the 8-inch network. Management may also have concerns about the sustainability of Client Solutions Group (CSG) and Infrastructure Solutions Group (ISG) demand, the pace of new ISG processor transitions, and the capabilities of their new VxRail systems. Moreover, they may lack confidence in their ability to continue executing their value creation strategy and capitalize on opportunities in the PC market. Finally, management may have concerns about negative P&L growth in the storage business and the sustainability of backlog orders.
Dell Technologies is a holding company. Through its subsidiaries, the company designs, develops, manufactures, markets, sells, and supports a range of products and services. The company's reportable segments are: Infrastructure Solutions Group, which includes servers, networking, and storage, as well as services and third-party software and peripherals; Client Solutions Group, which includes desktops, thin client products, and notebooks, as well as services and third-party software and peripherals; and VMware, which provides compute, cloud management, networking and security, storage and availability, and other end-user computing offerings.
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