Dell Computer Corp. (Nasdaq: DELL) was the most active stock on the Nasdaq, carried up 9 percent Wednesday as analysts' cheered its better-than-expected second quarter results and predicted strong performance for the second half.
Shares were up 3 13/16 to 44 15/16 Wednesday morning.
The largest direct seller of PCs reported earnings Tuesday of $507 million, or 19 cents a share, on sales of $6.14 billion. First Call consensus for Dell called for earnings of 17 cents a share. USB Piper Jaffray analyst Ashok Kumar was expecting revenue of about $5.8 billion.
Deutsche Banc Alex Brown upgraded Dell from "buy" to "strong buy," Hambrecht & Quist sent them up from "market perform" to "buy," Salomon Smith Barney upgraded them from "neutral" to "buy," and Warburg Dillon Read raised them from "hold" to "buy," Wednesday. After a few quarters of Dell skepticism, analysts seem to be believers again.
BancBoston Robertson Stephens also cheered on the stock. Analyst Daniel T. Niles today upgraded Dell to "buy" from a "long-term attractive."
"Given that only 16 percent of total revenues is enterprise related, Dell's Y2K risk is somewhat limited relative to the big system vendors," said Niles in a statement.
BancBoston Robertson Stephens has raised fiscal 2000 and fiscal 2001 earnings-per-share estimates from $0.70 to $0.77 and from $0.89 to $1.04, respectively. It has also raised its price target from $48 to $55, reflecting a return to the old high, set in February of this year.
Dell's sales total went a long way to eliminating analysts' fears. Many analysts on Wall Street were expecting sales growth of about 35 percent, impressive, but not Dell-like. Dell's revenue growth for the quarter was 42 percent.
Dell generated $930 million in cash in the quarter and repurchased 17 million of its own shares. Dell ended the quarter with $4.7 billion in cash.
And the outlook for the second half and beyond was rosy.
"Our outlook for the rest of this year and all of next remains very healthy as Y2K concerns appear to be diminishing," Dell CFO Tom Meredith said, during a conference call with analysts. "We see no reason for our historical pattern to deviate."