The media has been pounding Dell. And, why not? Computers exploding because of defective batteries?
When I first heard the news, Dell was trading around $22.50, and I thought that the stock would be a decent short into the high teens. Of course, earnings were released yesterday after the close, and the company said that Q2 profits dropped 51%. The stock fell in after hours trading, and now I am looking to be a buyer once it breaks below $20.
Watch the insiders over the next 30-60 days. I think you'll see Michael Dell send the markets a big message as I anticipate that he will cash in some cd's and make a huge purchase.
In reality, Dell's problems are only temporary. The bad news is Dell will probably miss out on the big back to school buying spree for laptops, so Q3 earnings will be bad as well. Value investors may have to wait a while before cashing in on a possible 40% gain.
If the stock can get as low as $18, I plan to unload some of my cash and buy the stock. I think the stock can easily get back above $25 over the next 12 months, and then $30 in 24 months.
Almost on cue, UBS came out this morning and downgraded Dell to "reduce" from "neutral". Your a little late to the party aren't ya fellas? UBS has a price target of $20 on Dell
Please remember when you hear that a brokerage firm issues an opinion on a stock, often it is the opinion of one person and his or her assistants. In my book, one personç—´ opinion is not worth the paper it is written on.
Be careful where you get your research, UBS was the same firm that had a buy on Enron even after it broke below $10.
