Are Wall Street All Wrong?! 😬

Major Setbacks = Major Comebacks. Especially if everyone is betting against you.

That’s the position that Dell Technologies find themselves in with their earnings report just around the corner, scheduled for August 29th.

Stock price has dropped over 50% from May 2024 highs which has scared off investors & left most analysts are feeling bearish. I’m talking 13 analysts downgrading their rating while only 2 have given them the thumbs up.

Luckily, analysts don’t define companies & the 50% drop might’ve been exactly what we needed to shake the hype out so we can buy Dell at a fair (or even great) valuation.

This might actually set us up for a huge earnings surprise. 📈 And who doesn’t love a good surprise when it goes your way?

Let me tell you why I think Dell is primed to shock everyone & get back on the upswing.

First of call, capital investment is heating up. Dell’s customers have hinted that they’re ready to open their wallets up again by spending on networking & infrastructure. That’s super important because if it comes to fruition we’ll likely see fatter margins for Dell in the next few quarters.

Fatter margins = fatter profits which (in theory) means higher share price.

And you didn’t think I was going to present a bull case without mentioning AI, did you?

The AI boom is still in it’s baby era & Dell is perfectly positioned to benefit. AMD’s strong performance with its data center chips is a clear signal that AI infrastructure is in hypergrowth mode.

Dell is ready to ride that trend with their AI server platforms. The total addressable market (TAM for short, is the total amount of money all customers could spend on a product or service) for AI compute is expected to hit $400 billion by 2027 (even more by 2030). If Dell make sure they get their fair share of that, & there’s no reason they can’t, then there’s huge room for growth.

AI is changing the game for computers, too. Intel is seeing more demand for AI-powered PCs, which is great news for Dell's computer business. It signals a growing market that Dell can tap into, leveraging Intel’s advanced processors to enhance & expand their own computer products.

Now, what if we had to look at Dell through the eyes of the 13 analysts who downgraded the stock? What are the risks?

Well, any slowdown in the economy could make those enterprise customers put their wallets back in their pocket which won’t give us those fatter margins we’re hoping for. We’re also depending on AI growth and that they’ll be be able to capture their share of the market. Dell are in a competitive space so it won’t be a walk in the park.

But with the broader AI trend looking positive for now & Dell’s diversified approach, the upside potential outweighs the risk for me right now.

The stock took a big hit dropping from $180 to $90 at it’s lowest. They’ve recovered 25% since then. It has been trading flattish for the last 10 days or so which I’d imagine is waiting for earnings.

I’m going to go small with my position size & see how earnings goes because it’s impossible to guess which way the market goes. Sometimes you’ll get a great report & the stock will drop. Sometime’s it’ll be awful & the stock will sky rocket.

And this is a long term play anyway so it really doesn’t matter too much in the short term, assuming the earnings aren’t awful.

If they can deliver a surprise & beat the analysts pessimism I think reaching old highs is very much on the cards. I’ll be targeting $200+ assuming I can see they’re making moves in the areas I’ve mentioned. That’ll be around 80% upside from current price.

Tesla Who? The New EV King 👑

Someone tell Elon to take a seat.

There’s a new EV king in town… in China, anyway. I’m talking about BYD Co, a Chinese automaker. But BYD isn’t just another car company. They started out in 1995 as a battery manufacturer & have evolved into a superhero in the EV space.

So what makes BYD special?

Well, for starters, they’ve mastered the art of producing high-quality vehicles at lower prices. In a competitive space like the Chinese market being able to offer consumers the best product at the best prices is a great place to find yourself.

Reliable + affordable = a massive customer base that loves your products.

Once you’ve got a hungry hoard of customers the next thing you need to do is make sure you can give them what they want & make sure you get what you want too. For BYD, that means making sure they keep healthy margins & profits rolling in.

BYD have nailed that, too.

In the NEV (New Energy Vehicle) segment they’ve captured 32% market share in China. That’s huge. And they’re not just sitting back admiring their hard work. Plans are in the works to expand into premium brands like Denza, Fangchengbao, & Yangwang,

If they can tap into the high-end market in a similar type of way, their growth numbers are going to be insane.

But with all these crazy numbers is there still room for us to make money? Or has all this growth already been priced in?

Well, BYD’s stock is currently sitting at a P/E ratio of around 20, which is pretty fair given its growth trajectory. It’s not dirt cheap, but we’re paying for quality & potential here. Plus, with the company's strong fundamentals, there’s limited downside. If you want to be in the EV space and want to tap into the Chinese market, it’s probably one of the more stable choices in what can be a super volatile market. Especially with the general sentiment around Chinese stocks at the moment.

And to be clear, there are geopolitical risks, especially concerning exports to regions like the EU and Southeast Asia. But exports only make up about 8% of their sales so it isn't a deal-breaker.

The real risk is China’s economic performance which is still finding it’s feet at the moment. If things get rocky, it could mean less people splashing out on new EVs. But even then, BYD’s strong position in the affordable car market gives them a cushion.

I think the risk is worth taking given BYDs position in the market, limited down & everything everything else they have going for them. Superior technology, cost efficiency, track record of smart management.

And they’re in a market with huge growth potential still to tap into

The stock likes to find a support around $175 - $200 which we’ve just moved away from. Resistance looks to come in around $275 - $300 which is a 25% -30% upside from current price. That’ll be the price levels I’m targeting to take profit.

It looks like the whole numbers (i.e $200, $300) could be acting as psychological support & resistance which could be indicative of profit taking in a volatile market. Just something to keep in mind but not to solely base your decision making off of.