CIBC World upgraded personal computer maker Dell (DELL) to sector outperform from sector perform.
Analyst Ali Irani says concerns about margin and growth outlook should dissipate within tailwind of declining component pricing, improving mix, and bullish guidance, which sees a $60 billion sales target pulled in by a full year to fiscal 2006 (ending January).
He notes third-quarter results and fourth-quarter guidance, while in-line, carry underlying strength. Expected savings from component buying drove upside in gross margins.
Irani raises his $1.50 fiscal 2006 earnings-per-share estimate to $1.60 on a third straight year of 19% top-line growth. He sets $1.85 fiscal 2007 earnings-per-share estimate, which generates a $48 target. He sees $1 downside for almost $10 upside potential.