Dell Technologies Inc. (DELL) shares rose more than 4% during Tuesday's session after Goldman Sachs upgraded the stock to Buy with a $96.00 price target – a 30% premium to Monday's closing price.

Key Takeaways

  • Dell shares moved sharply higher after Goldman Sachs upgraded the stock to Buy with a $96 price target – a 30% premium to Monday's close.
  • Analyst Rod Hall cited the company's rapid paydown of debt and above-consensus gross margin forecasts as catalysts for the upgrade.
  • The relative strength index (RSI) moved toward overbought territory, but the stock still has more room to run over the coming sessions.

Goldman Sachs analyst Rod Hall cited Dell's rapid paydown of debt and above-consensus gross margin forecasts as catalysts for the upgrade. While there are near-term PC and enterprise demand risks, the analyst believes that they are more than offset by above-consensus gross margin forecasts driven by a detailed mix model. The company's core gross leverage of 2.9x in the third quarter of fiscal 2020 should also continue to fall as debt payments roll in.

Chart showing the share price performance of Dell Technologies Inc. (DELL)

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From a technical standpoint, the stock moved sharply higher to test trendline resistance at around $77.70. The RSI moved toward overbought levels with a reading of 59.28, and the moving average convergence divergence (MACD) remains in a moderately bearish downtrend. These indicators suggest that the stock could have more room to run over the coming sessions, although the intermediate-term picture is uncertain.

Traders should watch to see if the stock breaks out or breaks down from these key resistance levels. If the stock fails to break out, traders could see a move lower to retest the 50-day moving average and trendline support levels near $73.00 or additional support near $71.35. If the stock breaks out from trendline resistance, traders could see a move toward trendline resistance at around $80.00 over the coming sessions.

Tip

Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). In other words, it is the sales revenue a company retains after incurring the direct costs associated with producing the goods it sells and the services it provides.

The Bottom Line

Dell shares moved higher during Tuesday's session after Goldman Sachs upgraded the stock to Buy with a $96 price target – a 30% premium to Monday's session. Analyst Rod Hall cited Dell's rapid paydown of debt and above-consensus gross margin forecasts as catalysts for the upgrade. While the RSI is modestly overbought at current levels, the stock could have more room to run before seeing consolidation.

The author holds no position in the stock(s) mentioned except through passively managed index funds.