Citi maintains Buy rating on Dell with $125 stock target

Citi has reaffirmed its Buy rating on Dell Technologies Inc (NYSE:DELL) with a stock price target of $125.00 following recent reports of China’s initiative to phase out US microprocessors, including those from Intel and AMD (NASDAQ:AMD). The Chinese government’s move aims to replace foreign-branded personal computers with domestically manufactured ones, a campaign that began in 2022.

According to data from IDC, approximately 5% of China’s PC unit share in 2023 was attributed to government purchases, with the commercial sector (government and enterprise combined) accounting for about 43% of the total market. Dell and HP (NYSE:HPQ), as major players in the PC industry, derive between 5-7% of their total China PC revenue from this segment, encompassing both government and enterprise sales.

Despite the potential challenges posed by China’s new policy, Citi maintains its Buy rating on Dell, believing that the risk to Dell’s business is relatively contained. The analysis suggests that the impact on Dell’s revenue from China, given its current market share and the scope of the government’s directives, should not significantly alter the company’s overall financial health.

Citi’s continued support for a Buy rating on Dell indicates confidence in the company’s ability to navigate the evolving technological and geopolitical landscape. The $125.00 stock price target suggests that Citi sees potential for Dell’s stock to perform well despite the recent developments in China’s technology procurement policies.

Investors and market observers will likely monitor how Dell and other US-based PC manufacturers adjust their strategies in response to China’s changing regulatory environment. Citi’s assessment provides a measure of stability in the face of these regulatory changes, indicating a level of confidence in Dell’s resilience and adaptability.