Brent Bracelin, hardware analyst at Pacific Crest Securities, told CNBC’s “Squawk Box” that Dell Computer’s decision to sell through retail outlets could boost the stock to as much as $35 a share.
“It’s certainly an interesting opportunity for Dell,” Bracelin said Wednesday. “U.S. retail (sales) for Hewlett-Packard is about a $10 billion business. Retail (has counted) for 0% of Dell’s revenue. So, (Dell) is clearly going after the retail channel as a new market for them.”
Earlier, Dell announced that it would sell personal computers at 3,500 Wal-Mart and Sam’s Club stores starting June 10. Dell pulled out of retail outlets in 1994 to focus on direct sales, which had become its sole sales strategy.
Bracelin said Dell’s first shipment to Wal-Mart sold out in a week and a second shipment is arriving now. He said Dell now out-sells Hewlett-Packard by about 6-1 at Wal-Mart, the nation’s largest retailer.
He said the stock, now at about $28 a share, can go to $30 based on earnings of $1.68 a share in calendar year 2008. He said the stock could go to $35 if Dell earns $2 a share based on strong retail sales at Wal-Mart and other outlets.
“Michael Dell spearheaded the direct initiative,” Bracelin said. “I think the fact that he’s come back, (and) taken a fresh look at the company is certainly an instrumental part of why they’re going to retail channels and why they’re looking at new avenues to grow the business.”