Focus on Companies: Is It a Good Idea to Buy Dell Now?

April 24, 2012 James Heinsman Company Spotlight

Dell has a hard time over the past several years as Apple expanded its product base into the PC market. Despite the challenge and the resultant decline in revenue from the consumer and public segments during fiscal year 2012 Dell still posted growth in its Earnings Before Interest and Taxes (EBIT) of 26%.

The growth is mostly from the company’s highly aggressive acquisition strategy which produced growth in its enterprise solutions and services business.

Analysts, however, are recommending a short-term “hold” and a long-term “buy” strategy on Dell’s stock. It appears that Dell will be exposed to many risk factors in the coming years such as weakening demand of Dell products; strong competition; increasing dependence on development of advances in technology; and a stronger relationship between revenues the company generates and the world economy.

Based on these considerations and others investors such as David Einhorn of Greenlight Capital and Prem Watsa of Fairfax Financial Holdings believe that Dell offers a long-term investment opportunity. Although they do not believe the market will change its perception of Dell’s stock in the next year, they do believe the market will notice that Dell has been undervalued over the next three years. As Dell and other PC-industry related companies continue to show better than expected sales figures, Dell’s stock prices should move up.

 

David Einhorn, Dell, Fairfax Financial Holdings, Greenlight Capital, Prem Watsa,

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