In this article, I have evaluated tech hardware stocks Dell Technologies (DELL) and Apple Inc. (AAPL) to determine the better buy. Based on the fundamental comparison of these stocks, I believe DELL is the better buy for the reasons explained throughout this article.
The technology industry is witnessing swift evolution through advancements like artificial intelligence (AI), fostering the expansion of the AI chip. With AI making its presence felt across diverse sectors, its incorporation into hardware systems such as GPUs, AI CPUs, TPUs, and specialized AI processors is boosting the hardware market.
The global hardware market is projected to reach $164.21 billion by 2027, growing at a CAGR of 7.9%.
Furthermore, digital data's increasing significance and utility are propelling the worldwide hardware storage market. Additionally, the surge in consumer desire for devices to securely store photos and other data, coupled with widespread smartphone adoption and heightened sales of consumer electronics, is poised to fuel growth in the industry.
Thus, the hardware storage market is expected to grow at a CAGR of 13% until 2028.
In terms of price performance, DELL stands as the winner. While AAPL has gained 15.3% over the past three months, DELL has returned 21.8%. Over the past nine months, AAPL has gained 29.8%, but DELL has soared 36.3%. However, AAPL has gained 50.1% year-to-date, whereas DELL gained 32.7%.
Here is why I think DELL could be a better buy in the near term:
Latest Developments
On July 31, 2023, DELL launched new offerings to enable customers to build generative AI (GenAI) models on-premises, accelerating improved outcomes and intelligence. The Dell Generative AI Solutions, building upon May's Project Helix announcement, cover IT infrastructure, PCs, and professional services, making it easier for organizations to adopt full-stack GenAI with large language models (LLM) at any stage of their journey.
These solutions drive transformation and better outcomes securely across industries and organization sizes.
On July 19, DELL announced it had signed a definitive agreement to acquire Moogsoft, an AI-driven provider of intelligent monitoring solutions that support DevOps and ITOps. This transaction will further enhance DELL's AIOps capabilities as part of its longstanding approach of embedding AI functionality within its product portfolio and as a critical component of its "multicloud by design" strategy.
Conversely, on June 21, AAPL launched the visionOS software development kit to enable its developer community to bring more smoothness to its app user experience. This new feature would allow users to interact with digital content in their physical space using natural and intuitive inputs.
Recent Financial Results
In the fiscal first quarter that ended on May 5, 2023, DELL’s total revenue came in at $20.92 billion, while its total operating expenses declined by 6.7% from the year-ago value to $3.95 billion. Its non-GAAP net income and non-GAAP earnings per share amounted to $963 million and $1.31, respectively.
In contrast, AAPL’s net sales decreased 2.5% year-over-year to $94.84 billion during the fiscal second quarter that ended April 1, 2023. Its gross margin declined 1.4% from the year-ago quarter to $41.98 billion. The company’s total operating expenses increased 8.6% year-over-year to $13.66 billion.
Moreover, AAPL’s net income decreased by 3.4% from the prior year’s quarter to $24.16 billion.
Past and Expected Financial Performance
AAPL’s revenue has grown at a 12.9% CAGR over the past three years. Its EPS is expected to come in at $1.19 in the to-be-announced quarter, $1.36 in the current quarter, and $5.97 in the current year. Its revenue is expected to amount to $81.82 billion in the to-be-announced quarter, $90.36 billion in the current quarter, and $384.81 billion in the current year.
On the other hand, DELL’s revenue has grown at 1.8% CAGR over the past three years. Its EPS is expected to come in at $1.14 in the to-be-announced quarter, $1.37 in the current quarter, and $5.57 in the current year. Its revenue is expected to amount to $20.85 billion in the to-be-announced quarter, $21.71 billion in the current quarter, and $86.94 billion in the current year.
Profitability
While DELL’s trailing-12-month asset turnover ratio of 1.13x is the same as AAPL’s, its trailing-12-month cash per share of $10.47 compares to AAPL’s $1.57. However, AAPL’s trailing-12-month gross profit margin of 43.18% is higher than DELL’s 22.57%.
Valuation
In terms of forward non-GAAP P/E, DELL is trading at 9.45x, lower than AAPL, which is currently trading at 32.82x. DELL’s forward EV/EBITDA multiple of 7.29 is lower than AAPL’s 24.29. Moreover, DELL’s forward P/S multiple of 0.44 is lower than AAPL’s 8.12.
Thus, DELL is relatively affordable.
POWR Ratings
DELL has an overall rating of B, translating to Buy in our POWR Ratings system. On the other hand, AAPL has an overall C rating, which equates to a Neutral. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. DELL has a B grade for Value. Its forward EV/Sales of 0.69x is 77% lower than the industry average of 3.01x, and its forward non-GAAP P/E multiple of 9.51 is 60.7% lower than the industry average of 24.22.
In contrast, AAPL has a D grade for Value. Its forward EV/Sales of 7.93x is 163.8% higher than the industry average of 3.01x. Its forward non-GAAP P/E multiple of 32.93 is 36% higher than the industry average of 24.22.
Among the 43 stocks in the Technology – Hardware industry, DELL is ranked #10, while AAPL is ranked #23.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Momentum, Quality, and Stability. Access all the DELL ratings here. To see AAPL’s ratings, click here.
The Winner
The escalating importance of digital data is propelling the global hardware storage market forward. Moreover, AI's presence in diverse sectors, particularly in hardware systems like GPUs, AI CPUs, TPUs, and specialized processors, is a key driver behind the expansion of the hardware market. Both AAPL and DELL stand to benefit from the industry tailwinds.
However, considering DELL's appealing valuation multiples, I think it might be a better buy in August than AAPL.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology – Hardware industry here.
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DELL shares were trading at $53.11 per share on Wednesday morning, down $0.26 (-0.49%). Year-to-date, DELL has gained 35.21%, versus a 19.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
Is Dell Technologies (DELL) a Better Buy in August Than Apple (AAPL)? StockNews.com
