(AP) Dell's stock climbed more than 5 percent on Monday as a Goldman Sachs analyst raised his rating and price target on the company. The analyst said that there may be too much skepticism over the personal computing segment.
THE SPARK: Bill Shope lifted Dell Inc.'s rating to Buy from Sell and increased its price target to $13 from $9.
THE ANALYSIS: Shope said in a client note that while there has been a shift to mobile and cloud computing, he believes that people are being overly skeptical about the personal computing segment and Dell.
While we expect companies more exposed to traditional PCs like Dell will face continued pressure, we believe that expectations have become too bearish and imply an overly draconian outlook for the computer market, the analyst wrote.
Investors can purchase Dell at an appealing stock price, as Shope said that the company's stock is down 31 percent since he started coverage of the company with a Sell rating in December 2010.
The analyst said that Dell also has a comfortable cash balance of $5.15 billion.
Dell has the option to take advantage of its healthy balance sheet for strategic purposes, something that other net debt hardware names do not have in their favor, Shope said.
The analyst said that a leveraged buyout of the company would be tough, given the potential deal's large size and the tax impact on foreign cash, but potential involvement by CEO and founder Michael Dell (who already owns 14 percent of Dell shares) makes it difficult to completely dismiss a leveraged buyout transaction entirely.
SHARE ACTION: Shares of Dell gained 53 cents, or 5.6 percent, to $10.18 in midday trading. The stock has traded between $8.69 and $18.36 over the last year. For the year to date, the stock is down 36 percent.