Dell’s EPS might double by 2030 due to enterprise AI adoption: BofA

Dell Technologies (NYSE:DELL), along with other IT hardware companies, stand to benefit over the next several years due to the growth of enterprise and sovereign artificial intelligence initiatives, according to Bank of America.

Dell shares edged up 3% during early market action on Friday. Shares have recovered significantly since hitting a two-year low in early April and have traded at year-to-date highs over the past week.

“The headwinds of the past decade from public cloud migrations (Capex to OpEx spending trends) should reverse over the next decade (bloated OpEx to ROI driving Capex) as enterprises harness AI to drive productivity,” said BofA analysts, led by Wamsi Mohan, in a Friday investor note. “We expect DELL to grow its topline by +12% over the next 5 years vs +2% over the prior 5 and materially raise our ests to reflect this tailwind.”

Based on an analysis of market share, pricing and operating margin assumptions, BofA’s base case has Dell’s earnings per share increasing to $19.01 by 2030.

“Success in AI servers will drive lower margin rates but would also drive higher OP dollars,” Mohan noted. “Given our view that the AI TAM has many years of growth ahead, we view higher OP dollars (+12.1% over the next 5 years) vs. +4.6% over the prior 5 years as a key driver for improved cash flows.”

BofA reiterated its Buy rating and boosted its price objective to $165 from $155.