Why Did Dell Technologies Tumble 5% Pre-Market Today?

• Morgan Stanley highlighted surging memory costs as a significant headwind to Dell’s profitability.
• Analyst Erik Woodring slashed the price target to $110 from $144.
• Dell is scheduled to report its third-quarter earnings on November 25.

Dell Technologies fell more than 5% in premarket trade on Monday after Morgan Stanley issued a stark downgrade. 

The brokerage firm has reportedly taken a sharply negative stance on Dell Technologies (DELL), slashing its outlook amid rising concerns over component costs ahead of its earnings. It downgraded the company’s stock to ‘Underweight’ from ‘Overweight’ and lowered its price target to $110 from $144.

What’s Behind the Downgrade

According to a CNBC report, analyst Erik Woodring pointed to surging memory costs, especially in DRAM and NAND, as a major headwind for Dell’s profitability. He argues that Dell, being heavily exposed to memory-intensive hardware, could see its margins squeezed over the next 12 to 18 months.

Following the downgrade, Dell Technologies’ stock traded over 5% lower in Monday’s premarket. 

Woodring drew parallels with a previous cycle between 2016 and 2018, when Dell’s gross margin declined significantly after memory prices rose. 

“This is important as history tells us that companies facing margin headwinds underperform peers with similar growth rates,” said Woodring. 

What are Stocktwits Users Saying? 

However, on Stocktwits, retail sentiment around the stock remained in ‘bullish’ territory amid ‘high’ message volume levels. 

Users said the ‘dip’ in the stock is a buying opportunity. 

Meanwhile, JPMorgan raised the price target on Dell to $170 from $165 and reiterated an ‘Overweight’ rating. The firm said the company is poised to benefit from near-term momentum in compute demand, according to TheFly. 

Dell is scheduled to report its third-quarter earnings on November 25. Analysts see a revenue of $27.27 billion and earnings per share (EPS) of $2.48, respectively, according to Fiscal AI data. 

DELL stock has gained 16% year-to-date and lost over 1% in the past 12 months. 

Also See: Nvidia Is The “Foundational Piece” Of AI Revolution, Says Dan Ives Ahead Of Earnings

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