Cramer: New Attitude Toward Old Tech Stock
"Every now and then a piece of research comes along and it just blows your mind," said Cramer. "It forces you to reexamine some of your assumptions."
That's how the Mad Money host feels about an unexpected upgrade made by Goldman Sachs Monday.
In a rather sudden move, Goldman turned from bearish to bullish on Dell - upgrading the PC maker from a sell all the way to a buy.
It's a rare thing for a firm to change their outlook so completely and something that Jim Cramer found intriguing.
Upon further examination of the note, Cramer had this to say:
1. The analyst who made the call, Bill Shope has a strong track record. "He took Dell to a sell two years ago and the stock's dropped 31% versus a 14% gain in the S&P 500."
2. Goldman set a reasonable upside price target. "The firm set a $13 price target; it's not calling for some double or anything near that."
3. The analyst had been very much against investing in what he calls "deep value hardware." In other words, he's not enamored with the industry
But perhaps the aspect of the call that Cramer found most intriguing was that it's almost contrarian.
"Put simply, everyone's negative and everyone's written off Dell simultaneouslyat precisely the moment when the company's priming with cash," he said. "Thatcash, plus the possibility of a leveraged buyout if it goes any lower, is adistinct possibility."
That's not to say there isn't potential downside there is – Goldmanacknowledged that in their note.
"If PC demand and pricing become weaker than even Bill Shope thinks, and he is looking for flat growth and aggressive price cutting, then it could be a loser. Second, if server pricing declines, Dell might be challenged to do well given that Dell has tried to move into bigger, more cloud like offerings," Cramer explained.
And Cramer added that tablets will likely cause demand destruction for all PCmakers – "the true enemy of the personal computer," he said.
However, he ultimately concluded that the sharp upgrade and resulting analysis could not be dismissed – not by a long shot.
"I don't like recommending a stock when the fundamentals aren't on firm footing - and I don't think Dell's are. That said, this is compelling research and those who want to speculate on something happening should now feel free to do so," Cramer concluded.
It seems other investors share Cramer's opinion – on Monday shares of Dell gained as much as 8% intra-day, the stocks biggest one day gain in more than a year.
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