CIBC Ups Dell to Sector Outperform

Analyst Ali Irani says margin and growth outlook concerns should dissipate for the personal computer giant

CIBC World upgraded personal computer maker Dell (DELL ) to sector outperform from sector perform.

Analyst Ali Irani says concerns about margin and growth outlook should dissipate within tailwind of declining component pricing, improving mix, and bullish guidance, which sees a $60 billion sales target pulled in by a full year to fiscal 2006 (ending January).

He notes third-quarter results and fourth-quarter guidance, while in-line, carry underlying strength. Expected savings from component buying drove upside in gross margins.

Irani raises his $1.50 fiscal 2006 earnings-per-share estimate to $1.60 on a third straight year of 19% top-line growth. He sets $1.85 fiscal 2007 earnings-per-share estimate, which generates a $48 target. He sees $1 downside for almost $10 upside potential.

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