Dell Inc. (NASDAQ:DELL) gets a major upgrade from Goldman Sachs this morning, and shares are soaring as a result. In a sudden turnaround, the financial firm switched its standing on the stock from Sell to Buy, a rare move in the financial industry.
In morning trades, shares of Dell Inc. (NASDAQ:DELL) are up almost 7 percent. The company’s stock has dropped more than 30 percent since December 2010, when Goldman Sachs issued its Sell rating.
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Analysts at Goldman Sachs say their sudden bullish view on the stock is based on three factors. First, although the demand for personal computers is down, they believe sentiment and expectations will tilt positively next year. Second, they say that consensus expectations for Dell Inc.’s (NASDAQ:DELL) fiscal year 2014 are down 28 percent from peak, so they believe the reset produces a “positive risk / reward for the stock.” Third, analysts believe that the computer maker’s net cash balance does provide some downside buffer and creates an opportunity for a leveraged buyout, or possibly a levered recap “under the right conditions.”
Dell executives have blamed their sagging sales on the increased demand for tablets and mobile devices. However, this morning Wim Lewi of Seeking Alpha said he believes that cloud computing trends are the real culprit of Dell’s disappointing earnings reports. He said the replacement cycle of computers has become longer because of the shift to cloud services.
Dell did announce an important acquisition earlier this month that could enable it to compete in the cloud management industry. As ValueWalk reported earlier this month, Dell acquired Gale Technologies, which specializes in infrastructure automation software, an essential element of cloud computing.