UBS Downgrades Dell's Rating to Neutral, Stock Prices Fall by nearly 6%

This year, Dell Technologies, which has seen a staggering 95% increase, has received a cooling signal from Wall Street.

UBS released a research report over the weekend, downgrading Dell (DELL) from "Buy" to "Neutral" while raising the target price from $167 to $243. Following the news, Dell's stock price fell 5.8% to $245.35 on Monday, while the S&P 500 and the Nasdaq Composite Index remained largely unchanged.

Server business is doing well, but the good is already priced in

UBS analyst David Vogt clearly affirmed Dell's fundamentals in the report: "Dell's differentiated technology and supply chain strategies have driven strong growth in AI-optimized servers and have helped the company flexibly cope with potential pressures from rising raw material costs such as memory."

UBS expects Dell's earnings to grow by 25% in the fiscal year 2027, and its AI server business to grow by 100%. At the same time, due to the U.S. government's accusations against the co-founder of rival Super Micro Computer for allegedly violating export control regulations, Dell may also seize the opportunity to capture market share.

The issue, however, is that the current stock price already implies investors' expectations of at least a 30% to 35% increase in earnings per share—significantly higher than UBS's forecast and far exceeding Dell's own medium-term long-term growth target. Vogt pointed out that even if Dell raises its performance guidance in the next few quarters, these increases "are likely already anticipated by the market." After that, UBS预计s that Dell's revenue growth will significantly slow down to 6% to 7% in the fiscal years 2028 to 2029.

The proportion of analysts with a Neutral rating has risen from 19% to 31%

UBS's judgment is not an isolated case. FactSet data shows that the proportion of Wall Street institutions giving Dell a "Hold" equivalent rating has risen from 19% in January of this year to 31%, with an increasing number of analysts drawing similar conclusions.

Vogt concluded, "After a strong execution over the past 12 months, the risk-reward ratio of the stock price has become balanced."

For Dell, the story of AI servers still holds, but on a stock that has nearly doubled in a year and has accumulated a 137% increase over the past 12 months, the gap between "good story" and "worth buying" is being increasingly digested by the market.