BofA Cuts Dell Price Target on Memory Headwinds but Reaffirms Buy

Core Viewpoint - BofA Securities has lowered its price target for Dell Technologies to $135 from $150 while maintaining a Buy rating ahead of the fiscal fourth-quarter results scheduled for February 26 [1] Group 1: Financial Adjustments - Rising memory costs are expected to overshadow a strong fiscal fourth-quarter performance, with a 140% year-over-year increase in memory costs compared to a prior assumption of approximately 40% [2] - BofA estimates a 489 basis point impact on total gross margin, a 262 basis point impact on operating margin, and a $2.48 impact on fiscal 2027 earnings per share due to continued increases in memory costs and necessary adjustments [3] Group 2: Operational Efficiency - The actual impact of rising memory costs is expected 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, leading to a reduction in fiscal 2027 EPS estimate by $0.86 to $10.00 [4] Group 3: Competitive Positioning - Despite elevated memory costs, Dell is considered better positioned than peers to manage supply chain challenges and structurally lower operating expenses, with BofA citing early-stage enterprise AI adoption, AI PC tailwinds, and increasing attachment rates of Dell intellectual property in storage as positive factors [5]