Dell stock target cut at BofA on rising memory costs

Investing.com -- Bank of America believes rising memory prices are set to weigh on Dell Technologies’ near-term profitability, prompting the bank to trim its price target to $135 from $150 per share in a note on Monday, while reiterating a Buy rating.

Analyst Wamsi Mohan wrote that “impending memory headwinds will likely overshadow what should be a strong F4Q print,” with memory costs now up 140% year-on-year compared to around 40% previously.

According to BofA, updated modelling shows a potential 489-basis-point hit to gross margin, 262-basis-point impact to operating margin and a $2.48 drag on earnings per share for fiscal 2027.

Mohan stressed that these calculated figures represent upper-bound scenarios, noting that “the true impact is less due to Dell driving further opex efficiencies, supply chain management, alternative component sourcing, and strategic pricing.”

BofA now expects fiscal 2027 EPS of $10.00, down from $10.86 previously.

The bank said both Infrastructure Solutions Group and Client Solutions Group margins will face pressure, with modelling showing a more than 300-basis-point deleverage in each.

ISG should prove more resilient because its portfolio is “more ‘mission critical’” and demand remains robust, driving a smaller forecast year-on-year decline. CSG margins, by contrast, may see some near-term strain as Dell works through “pre-contracted pricing.”

BofA said Dell’s long-term earnings power remains intact, supported by enterprise AI adoption, emerging AI PC tailwinds and rising attachment of the company’s storage intellectual property.

Still, the surge in component costs introduces uncertainty around fiscal 2027 guidance.

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