Dell upgraded at JP Morgan on AI; Garmin, others downgraded

JP Morgan updated hardware stock ratings for 2024, including bumping Dell (NYSE:DELL) and downgrading Garmin (GRMN).

Dell rose 2.5% in premarket trading on Monday.

The bank pushed Dell to Overweight from Neutral even as shares surged 87% in 2023, citing benefits from artificial intelligence.

"We are more positively inclined toward the [artificial intelligence]-driven compute investment cycle, which will benefit branded server companies (DELL and HPE in our coverage), even as the drivers for the remaining businesses are more mixed, being subject to the macro backdrop," analysts led by Samik Chatterjee wrote in a note.

The bank raised its revenue and earnings forecast for Dell through January 2026 on greater confidence in the sustainability of a stronger growth rate.

"While DELL is unlikely to be perceived as a primary beneficiary of an AI investment cycle, we expect all server companies to benefit," the analysts said.

Upside to Dell shares will stem from attributing a higher target valuation multiple to the shares relative to its historical average on account of the leverage to AI investments. A strong rebound in PCs led by robust refresh cycle can provide further upside to the bank's estimates.

JP Morgan bumped its price target to $90 from $77.

Dell has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Seeking Alpha's quant system, which consistently beats the market, rates the stock a HOLD.

Other changes include:

• Arista (ANET) and Coherent (COHR) were added to the Analyst Focus List.
• Fabrinet (FN) was downgraded to Neutral from Overweight.
• Garmin (GRMN) was downgraded to Neutral from Overweight.
• NetApp (NTAP) was downgraded to Underweight from Neutral.
• Sensata (ST) was downgraded to Underweight from Neutral.
• TD Synnex (SNX) was downgraded to Neutral from Overweight.

Shares of the above mentioned companies were little changed in premarket trading.