Key Moments
- Bank of America cut its Dell Technologies (NYSE:DELL) price target to $135 from $150 while maintaining a Buy rating.
- BofA’s updated modeling indicates potential impacts in fiscal 2027 of a 489-basis-point gross margin hit, a 262-basis-point operating margin hit, and a $2.48 drag on EPS.
- Fiscal 2027 EPS forecast was reduced to $10.00 from $10.86 as rising memory prices introduce uncertainty around guidance.
Price Target Lowered, Rating Unchanged
Bank of America lowered its price objective on Dell Technologies shares to $135 from $150 in a research note on Monday, citing the impact of sharply higher memory component prices on the company’s near-term profitability. Despite the reduced target, the firm kept its Buy recommendation on Dell Technologies (NYSE:DELL).
Analyst Wamsi Mohan wrote that “impending memory headwinds will likely overshadow what should be a strong F4Q print,” highlighting that memory costs are now up 140% year-on-year versus roughly 40% previously.
Modeled Margin and EPS Impact
Bank of America’s revised analysis points to a significant potential hit to Dell’s profitability metrics if memory costs remain elevated. The bank’s modeling suggests a possible 489-basis-point reduction in gross margin and a 262-basis-point decline in operating margin for fiscal 2027.
On earnings, the bank’s scenario analysis implies a $2.48 negative effect on fiscal 2027 earnings per share, leading BofA to cut its EPS forecast for that year to $10.00 from a prior estimate of $10.86.
| Metric (Fiscal 2027) | Previous View | Updated View / Impact |
|---|---|---|
| Price Target | $150 | $135 |
| EPS | $10.86 | $10.00 |
| Gross Margin | – | 489-basis-point potential headwind |
| Operating Margin | – | 262-basis-point potential headwind |
| EPS Impact from Memory Costs | – | $2.48 potential drag |
Mitigating Factors and Operational Levers
Mohan emphasized that the modeled figures represent upper-bound outcomes rather than base-case expectations. He noted that “the true impact is less due to Dell driving further opex efficiencies, supply chain management, alternative component sourcing, and strategic pricing.”
These operational initiatives are expected to soften, but not eliminate, the financial pressure stemming from the surge in memory component prices.
Segment-Level Margin Pressures
Bank of America expects margin headwinds across both of Dell’s primary reporting segments – the Infrastructure Solutions Group (ISG) and the Client Solutions Group (CSG). The bank’s modeling indicates more than 300-basis-point deleverage for each segment.
ISG is projected to hold up better relative to CSG, supported by what BofA describes as a “more ‘mission critical’” portfolio and strong demand, resulting in a smaller forecast year-on-year decline. CSG, on the other hand, may experience more immediate margin strain as Dell navigates “pre-contracted pricing” in the near term.
Long-Term Thesis Intact but Guidance Uncertainty Rises
Despite the pressure from higher memory costs, BofA argued that Dell’s longer-term earnings potential remains supported by several structural drivers. The bank pointed to enterprise AI adoption, developing AI PC momentum, and increased attachment of Dell’s storage intellectual property as key elements underpinning the company’s earnings power.
However, BofA cautioned that the rapid escalation in component costs adds an additional layer of uncertainty around the company’s fiscal 2027 guidance.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
