BofA Securities lowered its price target on Dell Technologies (NYSE: DELL) to $135 from $150 while maintaining a Buy rating ahead of the company’s fiscal fourth-quarter results scheduled for February 26.
The analyst noted that rising memory costs are likely to overshadow what is expected to be a strong fiscal fourth-quarter performance. BofA recently examined pricing, customer elasticity, and memory cost impacts on Client Solutions Group margins, adjusting its analysis to reflect a 140% year-over-year increase in memory costs, compared with a prior assumption of approximately 40%.
Assuming continued increases in memory costs along with pricing adjustments, reconfigurations, and operating expense reductions, BofA estimates a 489 basis point impact on total gross margin, a 262 basis point impact on operating margin, and a $2.48 impact to fiscal 2027 earnings per share.
However, the firm expects the actual impact to be less severe due to Dell’s ability to implement additional operating efficiencies, optimize supply chain management, source alternative components, and execute strategic pricing actions. As a result, BofA reduced its fiscal 2027 EPS estimate by $0.86 to $10.00.
Despite elevated memory costs, the firm believes Dell is better positioned than peers to manage supply chain challenges and structurally lower operating expenses. BofA reiterated its Buy rating, citing early-stage enterprise AI adoption, AI PC tailwinds, and increasing attachment rates of Dell intellectual property in storage.
