Sterne Agee’s Shaw Wu this morning cut is rating on shares of Dell (DELL) to Underpeform from Neutral, writing that the stock’s 20% run up this year defies the ongoing risks from competition it faces, plus its dependence on personal computers for 75% of its business.
“We believe investor sentiment on DELL shares has gotten too positive and arguably complacent,” writes Wu
We believe DELL remains in a tough competitive position sandwiched between lower-cost players (Lenovo and Acer) and AAPL encroaching more in its core PC business as Macs and iPads gain share [�] In addition, we see HPQ, IBM, and CSCO competing more in its core market in small-medium business (SMB) and servers. We view DELL as a company in transition that needs to take more aggressive steps. A key risk to our rating is if the equity market continues to be favorable, causing a further upside bias in shares.
Wu notes that with estimates for this calendar year projecting a 4% EPS decline for Dell, the company’s numbers don’t look as good as peers such as International Business Machines (IBM) or Apple (AAPL) or Cisco Systems (CSCO).
Dell shares today are up 6 cents at $18.10.
Fin.
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