Is Dell’s Stock a Buy After These Third Quarter Results?

With shares of Dell (NASDAQ:DELL) now trading below $10, as they have been since the beginning of October, is DELL a BUY, a WAIT and SEE, or a STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement:

Both the challenging macro-economic climate and the diminishing demand for personal computers wreaked havoc on Dell’s third quarter results.

On Thursday, the world’s third-largest maker of personal computers reported notebooks sales were down 26 percent year-over-year, desktop sales were down 8 percent, software and peripherals were down 11 percent, storage was down 16 percent, and services were down 1 percent. Only the company’s servers business saw improvement, growing 11 percent since last year and gaining market share.

Both the company’s sales and profit missed analysts’ expectations. For the three month period, sales were down 11 percent, falling from $15.4 billion in the year-ago quarter to $13.7 billion. Profit, excluding certain costs, fell from 54 cents per share last year to 39 cents per share in the most recent quarter. In comparison, analysts were expecting third-quarter sales of $13.9 billion and a profit of 40 cents per share.

The worse-than-expected results are likely to continue into the next quarter. As the company said in its earnings statement, “Dell sees the challenging global macro-economic environment continuing in the fourth quarter, which will continue to impact the company’s results.” Based on that assumption, Dell forecasts sequential revenue growth of 2 to 5 percent, which translates into sales of $14 billion to $14.4 billion for the next quarter. If this is the case, the company will once again miss analysts expectations; revenue is projected to be $14.5 in the next quarter.