FBR cuts estimates on Dell (DELL) based on forecasts that Taiwan notebook orders will be disappointing:
Based on continuing downward revisions to the 2H08 notebook PC build forecast, we are trimming our DELL revenue and EPS estimates for FY09 and FY10.
As reported by FBR’s semiconductor team, several of the major notebook builders in Taiwan have cut their 3Q build forecasts over the past few weeks. Though we believe it is still too early to conclude that the back-to-school notebook build will disappoint, we think the risk of that has risen. However, while we believe that aggregate 3Q PC build forecasts have been reduced, we believe that Dell’s forecasts have fallen less than others.
FBR maintains an Outperform because the firm still thinks this cyclical slowdown is already in the stock (we’re sceptical). With a multiple of roughly 11.6x its new FY10 estimate, FBR believes that “Dell shares already reflect expectations for a cyclical slowdown in PCs.” FBR also thiks DELL’s margins will improve due to:
- unexpectedly favourable component costs
- new notebook models with lower cost designs
- coming changes to lower cost logistics
FBR reiterates OUTPEFORM on Dell (DELL), target price $30.