Shope notes that Dell's shares have dropped 31% since he started coverage of the company with a Sell rating on December 12, 2010; over the same time period, the S&P 500 is up 14%. He points out that Dell has $5.15 billion in net cash, giving the company an enterprise value/EBITDA multiple of just 3x - 46% below the average stock he covers. Shope strersses that he remains cautious about PC and server demand trends, but contends that many of his long held secular concerns are now the Street consensus.
Shope writes in a research note this morning that his bullish take is based on three factors:
- While PC demand remains "depressed," he says that few has become widespread - and that "we could begin to see sentiment and expectations tilt positively in 2013.
- Consensus expectations for Dell's FY January 2014 results are down 28% from peak levels; he says the reset has "produced a positive risk/reward for the stock."
- Dell's net cash position, he says, "provides some downside buffer as it produces an opportunity for an LBO or leveraged recap under the right conditions." (But note that Shope adds that his analysis suggests "an LBO would still be challenging at this point."
Dell this morning is up 55 cents, or 5.7%, to $10.19.
