2020 was a tumultuous year for the computer hardware industry. Pandemic-induced global lockdown measures negatively impacted the production and subsequent sales of personal computers and related accessories in the first quarter of 2020. However, the industry recovered quickly as people grew accustomed to a remote lifestyle. In fact, the rising popularity of remote working indicates that the trend may be here to stay. Businesses are realizing that remote working can be more efficient and have been investing in permanent changes to maintain this arrangement even after the pandemic.
As a result, the computer hardware market is expected to grow at a CAGR of 9.4% year-over-year to $944.09 billion in 2021. Also, the wider roll out of 5G technology this year should contribute to the increasing demand for upgraded devices worldwide.
Dell Technologies Inc. (DELL) and HP Inc. (HPQ) are two renowned companies with a global market presence that operate in this space. Based on overall industry growth expectations over the coming years, we think these two companies have plenty of room to soar.
Dell Technologies Inc. (DELL)
DELL specializes in computer hardware products and software services in three segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG) and VMware. Known for its desktop hardware and peripherals, the company also offers a wide range of cloud enabled data analytics services, infrastructure management services, and cybersecurity solutions.
On November 12, DELL entered a strategic partnership with FedEx Corporation (FDX) and Switch Inc. (SWCH) to develop exascale multi-cloud edge infrastructure services. This technology aims to minimize the latency in data transfer, thereby revolutionizing the cloud computing industry.
DELL’s revenues have increased 3% year-over-year to $23.48 billion in the fiscal third quarter ended October 30, 2020. Net income has risen 60% from the year-ago value to $881 million, while EPS has grown 64% from the same period last year to $1.08. The company’s adjusted EBITDA has increased 13% year-over-year to $3.23 billion over this period.
The consensus EPS estimate of $2.13 for the current quarter ending January 31, 2021 indicates a 6.5% improvement year-over-year. DELL has an impressive earnings surprise history as well; it beat the Street EPS estimates in three of the trailing four quarters. The consensus revenue estimates of $24.46 billion for the ongoing quarter represents a slight improvement from the year-ago value.
DELL has gained more than 185% since hitting its 52-week low $25.51 in March. The stock hit its 52-week high of $75.39 on December 18, 2020.
How does DELL stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
It is currently ranked #2 of 30 stocks in the Technology – Hardware industry.
HP Inc. (HPQ)
HPQ develops and sells personal computers and access devices and solutions internationally. The company operates in three segments – Personal Systems, Printing and Corporate Investments. In addition to computer hardware, HPQ offers software and customer support services, and supports business incubation projects.
As the demand for computer hardware and technologies has risen significantly over the past year owing to the ballooning remote working and learning culture, HPQ reported impressive financials in the last reported quarter. The company’s non-GAAP net earnings has risen 18.9% sequentially to $835 million in the fiscal third quarter ended October 31, 2020. Net revenue has increased 6.7% from the prior quarter to $15.26 billion. EPS has grown 92.3% year-over-year to $0.50 over this period. On November 24, HPQ announced a dividend payout of $0.1938 for the first quarter of 2021 payable January 6, up 10% year-over-year.
The consensus EPS estimate of $0.66 for the current quarter ending January 31, 2021 indicates a slight improvement year-over-year. Moreover, HPQ beat the Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $14.98 billion for the ongoing quarter represents a 2.5% rise year-over-year.
HPQ has gained more than 95% to hit its 52-week high of $24.69 in December, since hitting its 52-week low of $12.54 in March.
DELL shares were trading at $72.39 per share on Monday afternoon, down $0.90 (-1.23%). Year-to-date, DELL has declined -1.23%, versus a -1.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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