After Dell’s stock took a hit last week and continued to fall in trading on Monday, CNBC’s Jim Cramer told investors why he thinks the stock is a good buy at current price levels.
“The main problem is that Dell has failed to live up to the unreasonably high expectations that have fueled the stock’s incredible rise this year,” he said.
Despite Dell’s better-than-expected profit and sales figures, its shares fell 18% on Friday and closed down more than 5% on Monday as investors were disappointed that Dell’s artificial intelligence efforts have yet to turn a profit and that management is predicting declining profit margins.
According to Cramer, Wall Street set unrealistic goals for Dell and initiated a “higher level of scrutiny.” Contributing to the profitability of AI business.
Even if Dell’s AI products aren’t yet driving revenue, Cramer said he’s impressed with sales momentum: Dell said on the earnings call that its AI server shipments have doubled from the previous quarter, and that its order backlog has grown by more than 30%..
Cramer called Dell’s recent share price decline a “healthy pullback in an overheated stock.” The company’s shares had more than doubled since the beginning of the year ahead of the earnings report, according to FactSet. And even after the drop, it remains up more than 70% since the start of the year.
“Dell’s stock price has fallen a lot, but expectations are coming closer to reality,” he said. “On the other hand, I think the fundamental story of AI is on track, but it may take a little longer to get there. So I want to buy.”
Dell did not immediately respond to a request for comment.
