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Dell Technologies (DELL) Scraps Fiscal 2021 View, Shares Fall

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Dell Technologies’ (DELL - Free Report) shares fell almost 9% following its withdrawal of fiscal 2021 guidance provided on Feb 27. The company cited uncertainty about the impact of the coronavirus spread on its business operations behind the withdrawal.

Dell joins a long list of tech bigwigs like Apple, Microsoft and Twitter who either withdrew their guidance or warned of lagging expectations due to the coronavirus pandemic. VMware (VMW - Free Report) , in which Dell has a majority stake, also nullified its first-quarter and fiscal 2021 guidance. (Read More: VMware Scraps Q1 & Fiscal 21 View on Coronavirus Woes)

Notably, for fiscal 2021, Dell projected total revenues between $92 billion and $95 billion. Operating income was expected in the range of $8.9-$9.5 billion. Moreover, fiscal 2021 earnings were expected between $5.90 and $6.60 per share.

Markedly, the Zacks Consensus Estimate for fiscal 2021 has moved 5.2% south to $5.88 per share, indicating a 20% fall from the previous year’s reported figure. Moreover, the consensus mark for revenues is pegged at $90.71 billion, suggesting a 1.6% slip from the prior-year reported number.

The stock has been down 24.6% on a year-to-date basis, underperforming the industry’s 19.5% decline.

Year-to-Date Performance



 

Windows 10 Refresh Cycle Ends to Hurt PC Sales

Dell is expected to benefit from strong demand for PCs and laptops owing to increased levels of remote working that have been undertaken by several companies and governments to curb the spread of the coronavirus (COVID-19). However, supply-chain constraint due to disruption caused by coronavirus-led lockdowns is a headwind.

In fact, this anticipated buoyancy in demand level is unlikely to sustain. The winding down of Windows 10 refresh cycle does not bode well for this Zacks Rank #5 (Strong Sell) stock. Management at Dell expects overall Client Solutions Group (CSG) demand to decelerate in fiscal 2021 despite a solid first-half of the same period.

CSG revenues, which accounted for 49.7% of revenues, increased 6% year over year in fiscal 2020.

Notably, Dell expanded its portfolio at CES 2020. The company’s new offerings are expected to strengthen its Dell’s premium Latitude, XPS and PC monitor portfolios and give the same an edge in the highly competitive PC market, which is currently dominated by the likes of Lenovo and HP (HPQ - Free Report) .

Weak Server Demand to Deflate Dell’s Prospects

Moreover, Dell expects slower demand in China to affect its Infrastructure Solutions Group (ISG) revenues in fiscal 2021.

ISG revenues, representing 36.9% of fiscal 2020 revenues declined 7% year over year due to decrease in sales of servers and networking solutions.

Notably, Dell along with Hewlett Packard Enterprise (HPE - Free Report) currently dominates the server market. (Read More: Server Market Data Release for Q4, Dell & HPE Lead the Way)

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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