shares are getting a lift Friday from Evercore ISI analyst Amit Daryanani, who reiterated his Outperform rating and raised his price target on the stock to $85 from $75.
Dell (ticker: DELL) shares came under selling pressure earlier in the week, on the news that VMware CEO Pat Gelsinger had agreed to return to Intel as CEO, succeeding Bob Swan.
Dell owns about 81% of
(VMW), and that stake accounts for a vast majority of Dell’s market capitalization. Gelsinger’s appointment triggered a wave of stock upgrades for
(INTC), given his previous 30-year run at the chipmaker, where at one point he became the company’s first chief technology officer. But the market saw Intel’s gain as VMware’s pain, and worried that it might impact Dell’s plan to spin off its VMware stake to holders later this year.
Daryanani argued Friday that the sell-off in Dell shares triggered by the Gelsinger news was “largely overdone,” and added Dell shares to Evercore’s “tactical outperform” list.
The analyst reported that Dell continues to negotiate with VMware on three elements of the anticipated spinout: the commercial relationship between the two sides, the magnitude of an anticipated special-cash dividend to Dell from VMware, and corporate governance. He added that Dell likely will spin out VMware sometime after September of this year, with a substantial cash payment to Dell to help the company de-lever its balance sheet.
“A more simplified corporate structure with a stronger balance sheet would resonate with investors and enable further multiple expansion,” he wrote, adding that his sum-of-the-parts valuation “conservatively pegs the value” at about $85 a share, but with a likely scenario above $100. And he notes that near-term the company is likely to see a boost from higher corporate IT spending on both servers and storage, providing some fundamental momentum.
Dell shares on Friday are up 1.1%, to $74.08.
Write to Eric J. Savitz at email@example.com