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Why Dell Technologies Stock Rose 13.7% in July

By Billy Duberstein - Aug 5, 2019 at 4:01PM

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The server company got a boost of confidence on increasing PC sales, though escalating trade tensions have reversed the move in August.

What happened

Shares of Dell Technologies (DELL 3.51%) surged 13.7% in July, according to data from S&P Global Market Intelligence, as the server and PC maker got a boost of optimism related to an upturn in the hardware cycle.

Though the market has turned for the worse in recent days, July was a good time for the technology sector. The thawing of trade tensions at the G20 summit in Japan led to hope that the current tech down cycle may be turning. In addition, a mid-July report showed the PC market actually grew 1.5% to 63 million units in the second quarter. Growth has been somewhat rare for the PC market, but an enterprise update to Windows 10 software, combined with an easing CPU shortage for Intel (INTC 3.06%) processors, has spurred growth in the mature tech sector.

A rack  of servers seen from a low angle.

Image source: Getty Images.

So what

As the PC market showed better-than-expected numbers, Dell also received a buy rating on an initiation by analysts at Wells Fargo. Analyst Aaron Rakers gave the company a $68 price target, saying, "[W]e view Dell as presenting a long-term attractive risk/reward ratio given the company's broad-based portfolio/software-to-hardware depth favorably positioning Dell to capitalize on the long-term architectural shift to software-defined hybrid multicloud."

Rakers is referring to the fact that Dell is not only a PC and server maker, but also has majority stakes in software companies VMware (VMW 0.90%) and Pivotal Software (PVTL), as well as security provider SecureWorks (SCWX 2.31%). He thinks the conglomerate can allow the company to pivot toward the areas with the most growth.

Now what

Dell had nearly reached Rakers' price target level earlier this year, before its May earnings report sent shares reeling. The company actually beat earnings expectations at the time, but revenue came up short. Apparently, the light revenue was enough to spook investors looking for signs of a recovery for Dell's products. Investors will get another glimpse into the company's financials when it reports on Aug. 29.

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Stocks Mentioned

Dell Technologies Inc. Stock Quote
Dell Technologies Inc.
DELL
$46.61 (3.51%) $1.58
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$43.71 (3.55%) $1.50
Intel Corporation Stock Quote
Intel Corporation
INTC
$44.40 (3.06%) $1.32
VMware, Inc. Stock Quote
VMware, Inc.
VMW
$101.50 (0.90%) $0.90
SecureWorks Corp. Stock Quote
SecureWorks Corp.
SCWX
$10.65 (2.31%) $0.24
Pivotal Software Stock Quote
Pivotal Software
PVTL

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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