Does Dell Have a Bright Future?

With shares of Dell (NASDAQ:DELL) trading around $13, 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:

T = Trends for a Stock’s Movement

Dell is a global information technology company that offers its customers a range of solutions and services, which are delivered directly by Dell as well as other distribution channels. The company operates in four segments: Large Enterprise, Public, Small and Medium Business, and Consumer. Dell serves a wide range of customers: global and national corporate businesses; educational institutions; government, health care, and law enforcement agencies; small and medium-sized businesses; as well as end users. Through its four segments, Dell is able to provide information technology products to a growing user base around the world.

Dell is set to finally land in the arms of founder Michael Dell. A shareholder vote on Thursday is expected to approve Michael Dell’s $25 billion offer to take the PC maker private. Michael Dell had been in a bidding war with activist investor Carl Icahn for months, but earlier this week, Icahn dropped out of the race. Michael Dell partnered with Silver Lake Management to finance the deal.

T = Technicals on the Stock Chart Are Strong

Dell stock has been fairly volatile as a flurry of headlines continue to affect it. The stock has not made much progress in the last several weeks so it may need a little more time. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dell is trading above its rising key averages which signal neutral to bullish price action in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Dell options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Dell Options




What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

October Options



November Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Dell’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dell look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Dell has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Dell’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Dell stock done relative to its peers Apple (NASDAQ:AAPL), HP (NYSE:HPQ), IBM (NYSE:IBM), and sector?






Year-to-Date Return






Dell has been a relative performance leader, year-to-date.


Dell offers technology products and services to consumers and companies around the world. The company is reportedly closer than ever to being taken private by founder Michael Dell. The stock has been fairly volatile this year but has stabilized in recent weeks. Over the last four quarters, earnings and revenues have been decreasing, which has produced mixed feelings among investors in the company. Relative to its peers and sector, Dell has been a year-to-date performance leader. WAIT AND SEE what happens to Dell stock this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.