Dell Revisited: Significant Upside Over Next Two-To-Three Years

Shares of Dell (DELL) have caught a strong bid over the last month, up 10% since news broke of Goldman Sachs' buy recommendation and subsequent price target of $13. GS initially rated Dell as a sell.

I generally don't place much emphasis on analyst actions, but the event was significant as it appeared to finally get some investors interested in the stock after a dismal 2012 in which the shares fell nearly 30%.

When I recommended Dell's shares as recently as October 1st, I emphasized Dell's apparent valuation and growth estimates as a PC maker, rather than the enterprise solutions firm it's in the process of becoming. Trading at a 6.4 times Enterprise Value/Net Income ratio, it's clear the market is still not buying Dell's ability to successfully make a major business transition, or investors are still not aware of that the relevance of the firm's PC operations in the context of the bottom line is on the decline.


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