Dell Stock Forecast 2019
Stock market investors haven’t heard much about Dell Technologies Inc until very recently. That’s because the company went private in 2013 through one of the biggest leveraged buyouts in history.
But now, things are about to change, as the tech giant has just gotten shareholders’ approval to return to the public market. For investors looking for a Dell stock forecast for 2019, here’s what you need to know.
Dell Technologies Going Public
On December 11, Dell announced that its shareholders have voted to approve a transaction that will make the company public again. (Source: “Dell Technologies Stockholders Approve Class V Transaction,” Dell Technologies Inc, December 11, 2018.)
As part of the transaction, Dell will buy back all of the outstanding shares of its tracking stock.
Now, I know what you are thinking: since Dell Technologies Inc is a private company, what on Earth is this tracking stock?
Well, in 2016, Dell acquired EMC Corp. To help finance the EMC acquisition, Dell issued a class V common stock that since then, has been trading on the New York Stock Exchange under the ticker symbol “DVMT.”
DVMT is a tracking stock that is intended to, “track the performance of a portion of Dell Technologies’ economic interest in the VMware business.” VMware was a part of EMC, and has become a subsidiary of Dell after the EMC acquisition. (Source: “Tracking Stock Information,” Dell Technologies Inc, last accessed December 14, 2018.)
According to the proposed transaction was just approved, DVMT shareholders can choose to receive either a cash payment of $120.00 per share or between 1.5 and 1.8 shares of Dell’s class C common stock. The cash part of the deal will come from Dell and a special dividend from VMware.
“We appreciate our stockholders’ support. With this vote, we are simplifying Dell Technologies’ capital structure and aligning the interests of our investors,” said Dell Chairman and Chief Executive Officer Michael Dell.
“This strengthens our strategic position, as we continue to deliver innovation, long-term vision and integrated solutions from the edge to the core to the cloud. We’ve created Dell Technologies to be our customers’ most trusted partner in their digital transformation.” (Source: Dell Technologies Inc, December 11, 2018, op cit.)
Note that Dell is going public without an initial public offering. Instead, the company’s class C shares are expected to start trading on the New York Stock Exchange on December 28, 2018 under the ticker symbol “DELL.”
Dell Stock Financials: What We Know So Far
In this day and age, investors who buy tech stocks are looking for growth. The good news is, based on Dell’s latest financial results, business has indeed been improving.
In the third quarter of 2018, Dell Technologies Inc generated $22.5 billion in revenue, representing a 15% increase year-over-year. The company’s three operating segments—”Infrastructure Solutions Group,” “Client Solutions Group,” and “VMware”—all posted double-digit revenue growth from a year ago. (Source: “Dell Technologies Reports Fiscal Year 2019 Third Quarter Financial Results,” Dell Technologies Inc, November 29, 2018.)
Looking a bit further back, you’d see that in the first nine months of this year, Dell’s revenue growth was an even more impressive 17%. At the end of September, the company had $20.4 billion in cash and investments.
Ultimately, keep in mind that Dell is already a household name, and it remains as the number-one provider of workstations in the entire world. It the company can keep up its double-digit growth rates in 2019, it would give investors a good reason to warm up to its stock.
Dell has delivered decent growth numbers for a decades-old company. And after going public again, it will likely emerge as a financially stronger and more diverse company compared to when it went private a few years ago.
Still, I want to point out that the timing of the upcoming relisting might not be the best. The U.S. stock market had a huge tumble over the last several months, and tech stocks were hit particularly hard.
To give you an idea, Facebook, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Google, aka Alphabet Inc (NASDAQ:GOOG)—the once high-flying group of stocks known as the “FANG” stocks—all took double-digit losses in the latest market pullback.
And now, things still don’t look much better. Higher interest rates are slowing the economy down, and the trade tension between the U.S. and China could lead to tariffs. The headwinds facing the U.S. economy means investors are probably not in the best mood to welcome a tech stock back to the market.
I like what the company has been doing, but for a bullish Dell stock forecast in 2019, we’ll probably need uplifted market sentiment.