UPDATE: Analysts Bullish on Dell (DELL) Chatter; See Deal Getting Done Above $15/Sh.

January 15, 2013 11:38 AM EST
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Price: $13.86 --0%

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    9 Buy, 21 Hold, 3 Sell

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    Up: 22 | Down: 32 | New: 34
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(Updated - January 15, 2013 11:55 AM EST)

Dell (Nasdaq: DELL) shares are moving higher again today amid speculation on Monday that the PC giant might be going private.

Though not comments were issued by the Company, Dell managed to squeeze nearly 13 percent higher to close at its highest level since last August. One analyst is getting behind the move today, possibly aiding investor sentiment that a deal might be at hand.

Topeka Capital's Brian White thinks Dell might be thinking "BIG" about enhancing shareholder value. Topeka commented last November that, "with this type of valuation, we believe Dell needs to start thinking BIG about enhancing shareholder value or someone else may beat them to the punch."

White noted that Dell shares sold off following fiscal third-quarter 2013 results last November, putting its valuation at three time CY13 estimates. The analyst said this was pretty much a slap in the face to the stock. Dell had about $2.95 per share in cash and plenty of ability to generate free cash flow.

With Dell trading at 4.9 times CY13 EPS projections, White feels that the company should bring in $15 to $18 per share in a bid.

Not helping Dell is its transition from a PC player to broad-based IT vendor. Many still focus and scrutinize Dell's PC business and going private would afford Dell the opportunity to build-out its enterprise unit without public feedback. White continued, "During 3QFY13, Dell generated 48% of sales from the PC market and down from 67% in 1QFY05; however, we estimate this market represents only 25-35% of operating profit."

Topeka rates Dell at Buy with a price target of $13.50. Shares are up 1.4 percent Tuesday.

UPDATE - Jefferies' Peter Misek is also commenting on the recent news. He thinks that a price anywhere from $15 to $17 per share is achievable with about $10 billion in debt, emphasizing that private equity rarely invests more than $1.5 billion on any one investment and many avoid club deals. However, P/E firms will likely want a majority position and Michael Dell's $4.5 billion stake makes it tough. A deal might get done under $17 if Dell sells a portion of his holdings.

Jefferies has Dell at Hold, moving its price target from $10 up to $13.

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