Bank of America has trimmed its price target for Dell Technologies to $135 per share from $150, citing a substantial run-up in memory prices that it expects will weigh on the company's near-term profitability. The bank reiterated a Buy rating in a note released on Monday.
Analyst Wamsi Mohan flagged the component cost increase as a critical near-term risk, writing that "impending memory headwinds will likely overshadow what should be a strong F4Q print." The bank's note points out that memory costs have risen roughly 140% year-on-year, a step up from about 40% previously.
Updated modelling provided by Bank of America quantifies the potential impact on Dell's 2027 financials: a hit of 489 basis points to gross margin, a 262-basis-point reduction to operating margin and a $2.48 drag on earnings per share for fiscal 2027.
Mohan emphasized that these estimates represent upper-bound outcomes, adding that "the true impact is less due to Dell driving further opex efficiencies, supply chain management, alternative component sourcing, and strategic pricing." Reflecting those considerations, the bank lowered its fiscal 2027 EPS forecast for Dell to $10.00, down from $10.86 previously.
Bank of America expects pressure across Dell's major commercial businesses. Its modelling shows more than a 300-basis-point deleverage for both the Infrastructure Solutions Group (ISG) and the Client Solutions Group (CSG).
Within that framework, ISG is viewed as comparatively more resilient because the unit's offerings are described as more "mission critical" and remain in robust demand, resulting in a smaller expected year-on-year decline. CSG, by contrast, may face nearer-term margin strain as Dell navigates through "pre-contracted pricing."
Despite the near-term headwinds, the bank maintained that Dell's longer-term earnings power appears intact. Factors cited in support of that view include enterprise adoption of AI, emerging tailwinds for AI-capable PCs and increased attachment of Dell's storage intellectual property. Nevertheless, Bank of America concluded that the recent surge in component costs introduces uncertainty around Dell's fiscal 2027 guidance.
Context and implications
The bank's action lowers the valuation expectation for Dell in the near term while leaving its buy conviction unchanged. The updated forecasts and scenario modelling underline how volatile component markets - specifically memory pricing - can translate into measurable margin and EPS downside, even for large systems vendors with diversified portfolios.