Dell Technologies (DELL) has gotten a tepid response from Wall Street since returning as a publicly traded company late last month. Dell stock has trended down since it went public for the second time.
XUBS analyst John Roy initiated coverage of Dell on Tuesday with a neutral rating and 12-month price target of 48. Last Wednesday, BMO Capital Markets started coverage of Dell with a market perform rating and also set a price target of 48.
Dell stock returned to the public market after a five-year absence on Dec. 28 when the company completed a reverse merger with the tracking stock for its stake in VMware (VMW). It ended its first day of trading at 45.43. Dell stock rose 0.5% to 43.01 on the stock market today.
Multiple Headwinds For Dell Technologies
The computer hardware maker faces a bunch of headwinds. They include its high debt load and pressure from cloud-computing rivals, Roy said. Dell still comes across as an old-school tech company with its core business of personal computers, servers and data storage equipment.
"The uncertainty around Dell's end markets, its ability to grow, and lack of catalysts keep us neutral," Roy said in a report. "Dell's return to the public markets comes at a time when global growth looks to be slowing."
Dell competes with HP Inc. (HPQ) and Hewlett Packard Enterprise (HPE) in on-premise hardware. Meanwhile, cloud-computing services from Amazon.com (AMZN), Microsoft (MSFT) and Alphabet's (GOOGL) Google are taking share in the overall information technology market.
"Dell generates 90% of its revenues from end markets that are not growing in aggregate, though there are some pockets of growth within them," Roy said. "PCs and related peripherals account for 49% of revenue, and server and networking and storage products account for 41%."
He added, "The PC business tends to be cyclical with current strength coming mainly from Windows 10 refresh and employment growth. The server and storage market would be pressured in the long term as an increasing number of enterprise workloads move to the cloud."
Roy sees PC sales declining at a compound annual rate of 0.5% over the next three years. Servers and storage will drop 1.4% and 3.1%, respectively, Roy said.
Dell went private in late 2013 following its merger with storage gear maker EMC.
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