Like a commuter caught in an early evening traffic jam, Dell Inc. (NASDAQ:DELL) stock is stuck under $13.65 a share. Investors don’t believe Carl Icahn’s $14 bid is serious, even if the fight between Icahn and Michael Dell is all that and more.
“Can you imagine a real estate broker running advertisements warning of termite danger in a house each time a prospective buyer seems interested?” Icahn wrote in an open letter to shareholders.
He’s referring to a late March filing in which Dell Inc. (NASDAQ:DELL) described its prospects as bleak enough to require a total overhaul of the business, an overhaul best executed as a private entity. Who’s right?
Let’s address that question in context. Here’s a by-the-numbers look at how Dell Inc. (NASDAQ:DELL) stock compares to peers Apple Inc. (NASDAQ:AAPL) and Hewlett-Packard Company (NYSE:HPQ):
| Key Statistics | Dell | Apple | HP |
|---|---|---|---|
| Current share price | $13.48 | $432.25 | $25.44 |
| Shares outstanding | 1.76 billion | 938.6 million | 1.93 billion |
| Market cap | $23.7 billion | $405.5 billion | $49.1 billion |
| Trailing P/E ratio | 12.74 | 10.31 | Not available |
| PEG ratio | 2.24 | 0.52 | Not available |
| Gross margin | 21.1% | 39.5% | 23.6% |
| Cash from operations | $3.38 billion | $55.26 billion | $13.02 billion |
Sources: S&P Capital IQ and Yahoo! Finance.
And here’s what Fools say, going by the data available in our CAPS investor intelligence database:
| CAPS Category | Dell | Apple | HP |
|---|---|---|---|
| CAPS stars (out of 5) | ** | **** | ** |
| No. of CAPS ratings | 5,686 | 30,076 | 3810 |
| Bullish CAPS ratings | 3,982 | 27785 | 3406 |
| Bearish CAPS ratings | 1,704 | 2291 | 404 |
| Bull ratio | 70% | 92.4% | 89.4% |
Source: Motley Fool CAPS.
Ouch! I’m not so sure Southeastern deserves such harsh criticism.
Verdict: Sell Dell stock now
And yet it’s worth noting that Southeastern has sold half its stake in Dell Inc. (NASDAQ:DELL) to Icahn. Explaining the move in a statement to Businessweek, the firm said Icahn is “in the best position” to lead the fight for a better offer. I suppose just saying “we have to move on” would have been too forward?
To be fair, those holding on are still due a dividend payment yielding 2.4% annualized. Dell Inc. (NASDAQ:DELL) also continues to partner with Oracle Corporation (NASDAQ:ORCL) for serving data centers and other larger-size customers. There’s plenty of life left in the business.
But can Icahn force a sale above $13.65 a share? I don’t think so. Not with Southeastern moving to the sidelines. Do you agree? Let us know what you think of Icahn’s chances, and whether you’d buy, sell, or short Dell Inc. (NASDAQ:DELL) stock at current prices, using the comments box below.
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The article Here’s How to Play Dell Stock Now originally appeared on Fool.com.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Apple at the time of publication. Check out Tim’s web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Oracle.
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