With shares of Dell Inc. (NASDAQ:DELL) trading at around $10.68, is Dell an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
If you’re a man, then Dell might remind you of a beautiful woman in a bar who looks at you with a spark in her eye, talks to you in a suggestive voice, and even asks you to follow her out the door. However, once you follow her out the door, you end up standing outside looking at an empty sidewalk. A car drives through a nearby puddle and splashes water onto your favorite outfit. What once looked like something with great potential was nothing but a mirage. The amazing thing is that you will walk back into the bar and fall for the same woman again. As long as she is there, you will allow her to lead you on and let you down time and time again.
If you’re familiar with Dell, then you understand. Dell has a habit of making acquisitions that fool investors into believing there will be a light at the end of the tunnel. Some examples over the past few years include Wise Technology, Perot Systems, KACE Networks, Gale Technologies, SonicWall, and Quest Software. Is it possible that these acquisitions will make Dell a shining star again? Yes, but so far, not so good. Dell is attempting to become like International Business Machines Corporation (NYSE:IBM), but it’s not working. Dell needs to understand that investors and humans, and humans like to get excited. Therefore, Dell needs to make an acquisition that will excite investors… give them something to talk about.
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All of that said, there is a common misconception about Dell these days. Everyone is still hooked on Dell being a PC company. Dell still sells PCs, but it also sells smartphones, tablets, workstations, notebooks, and much more. Dell has also been working its way into the IT business. Actually, IT is now the first thing listed on Dell’s business profile. This is a subtle hint for the future direction of the company. Another positive is that Goldman Sachs (NYSE:GS) recently upgraded Dell to a Buy. Furthermore, 15 of 19 analysts are bullish on the company. As far as the short position goes, it’s 5 percent, but considering the constant negative attention Dell receives, you would expect it to be much higher.
Let’s take a look at some important numbers for Dell. There are some interesting surprises.