Dell Technologies Pre-earnings Analysis
Chart done on hourly timeframe. Dell investors have enjoyed a multi-month rally since the company’s last earnings report, but its valuation will be tested again this week upon their new earnings release. The stock’s 70% rally since March has moved its price to earnings ratio to 37, far above the healthy 15-25 healthy range, but investors are hoping that the company’s net income continues to grow as it did over the last two quarters. If it does, then the price to earnings ratio will shrink, justifying the current stock valuation. Despite falling revenue, Dell grew its net by as much as 310% in Q3 and 89% in Q4 of last year, which shows operational competence from its leaders. Earnings per share grew once again in Q1 of this year, but that number is expected to move from 1.97 last quarter to just 1.00 this quarter. Dell will need to post a number closer to last quarter’s 1.95 performance in order to satisfy Wall Street, not just the expected 1.00.
Having already moved so much, its difficult to stay bullish on this name, especially with their declining revenue, but Wall Street seems to be feeling greedy on this so an earnings jump is not completely out of the picture. If they do jump on earnings, they’ll probably begin a pull back shortly after.
Option chain analysis:
DELL's option chain expiring on June 21 2024 currently reflects an implied volatility reading of 68%, which translates to about a $24 move from the underlying stock between now and then. The direction of that move will depend on their earnings outcome and call.