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Dell (NASDAQ: DELL), a PC maker that competes with Hewlett-Packard (NYSE: HPQ) and Apple (NASDAQ: APPL), received an upgrade on Monday. According to Marketwatch, an analyst at Broadpoint AmTech is bullish on the company because of the possibility that corporations will perceive a need to invest in technologies to replace older systems. The analyst thinks Dell shares are a buy.
Well, Dell's stock sure has experienced a high amount of momentum this year, no question about it. The market is clearly discounting an end to the recession. If such an event is essentially in place, then it's easy to see why investors would buy Dell. Not only will businesses put cash to work to make their operations more competitively efficient, but consumers will likewise get out there and replace the laptops/desktops/printers/whatever that they've held onto for longer than usual because the effect of declining Wall Street indexes made them fearful of any big-ticket purchases. Dell should theoretically benefit from a macro recovery, since the company's brand still resonates with the PC-buying crowd.
We're not out of the woods yet, though, so I would be careful about loading up either just because of, or right after, this upgrade. And then there's another wrinkle: Dell will be reporting earnings this Thursday. That might make playing Dell a bit scary because of the potential of volatility to the downside. I mean, if the institutions hate the press release and punish the stock, then an investor who purchased shares earlier in the week because of the upgrade will certainly feel pretty lousy.
I'd hate to be in such a position. What I'd rather do at this point in the game is wait until the earnings come and go and then watch the price action for a little while. If shares give you an opportunity via a decent pullback, then you might try trading Dell.
It does seem as if the market wants to take Dell higher. Keep in mind, though, that one day we're all going to wake up to one big correction. So be very careful with any of the moves you make. Only buy what you are most comfortable with (i.e., stocks you would add to if they went down in price).
Disclosure: I don't own any company mentioned; positions can change without notice.
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