When an analyst hikes a price target by 55% and still tells clients to sell, the headline number is doing the heavy lifting for the part of the note nobody wants to read.
That is the trap of Wall Street math during an AI rally. Bigger numbers feel like progress, but they almost always come with assumptions attached. Investors see a fresh target, line it up against the current price, and decide whether to add, hold, or trim. The arithmetic, however, only matters if you read what comes after it.
Right now, Dell Technologies (DELL) is the case study. The PC and server giant has ridden the AI infrastructure wave from roughly $107 last November to $242.93 on May 20, with Michael Dell publicly touting 1,000 new enterprise AI customers signed in a single quarter. The stock has roughly doubled in six months. Bulls have called it the cleanest non-Nvidia play on AI server demand.
So when Morgan Stanley raised its Dell price target by 55% on May 21, it should have been a celebration.
It was not. The new $170 figure sits 30% below where the stock closed the prior session, and the firm is still telling clients Dell is a sell.
Morgan Stanley raised the Dell stock price target but kept the sell call
Analyst Erik Woodring lifted his Dell price target to $170 from $110 and bumped his fiscal 2028 earnings estimate to $14.13 a share from $11.79, according to the Morgan Stanley research note dated May 21.
That sounds bullish. The rating did not move.
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Dell remains underweight, which is Morgan Stanley’s equivalent of a sell. Woodring describes Dell’s risk-reward as asymmetrically negatively skewed, with a bull case of $272, a base case of $170, and a bear case of $108. The probability-weighted return from current prices, he writes, works out to a 36% loss.
Three things drive that call. First, Dell’s stock has re-rated from 9 times forward earnings to more than 16 times in six months. Second, Dell now trades at a 30% premium to its AI infrastructure peer group, an all-time high, according to Morgan Stanley. Third, that same peer group on average traded at a 15% discount to Dell-style hardware peers between 2023 and 2025.
In my analysis, that last point is the one that matters. A 45-percentage-point swing in relative valuation is not a small adjustment. It is the kind of move that historically resolves through either earnings catching up to the multiple, or the multiple coming back down to earnings.
The firm thinks the second outcome is more likely.
Why Dell’s AI server momentum is not enough for Wall Street
Dell’s near-term numbers look strong. Morgan Stanley now expects Dell to report fiscal first-quarter revenue of $39.1 billion and earnings of $3.20 a share, which would beat consensus by 7.5% and 8% respectively.
The firm’s checks with Asia suppliers also point to Dell’s full-year AI server revenue topping $65 billion, well above Michael Dell’s own $50 billion target set earlier this year. That is where it gets complicated.
Related: BofA resets DELL stock price target for second time in just 21 days
The transition from Nvidia‘s Grace Blackwell to Vera Rubin systems late this year is expected to compress Dell’s AI server gross margins, according to Morgan Stanley’s tracking of ODM partners in Greater China. Memory and DRAM hyperinflation is doing the rest of the damage.
Here is how the squeeze sets up:
- NAND spot prices are up 680% year over year.
- DRAM contract prices are up 640% year over year.
- AI server gross margins are forecast to slide from 6.2% in fiscal Q1 to 5.0% by fiscal Q4 of 2028.
- Every 1,000 Vera Rubin racks shipped equates to roughly 36 cents of earnings per share for Dell.
What struck me when I cross-checked the math is that Dell is being asked to do two contradictory things at once. Grow AI server revenue 165% year over year, while protecting traditional hardware margins from once-in-a-generation memory inflation. Morgan Stanley’s view is that one of those will break by the second half of the year.
The firm’s fiscal second-half 2027 earnings estimate already sits 7% below the Street, and its full-year fiscal 2028 estimate is 6% below consensus.
What Dell’s next earnings report could do to the stock
Dell reports fiscal first-quarter results next week. The setup is unusual.
Woodring acknowledges it is hard to be tactically negative into the print. He expects Dell to deliver a beat and raise, with full-year earnings guidance moving higher to roughly $13.50 a share from $12.90, according to Morgan Stanley. He still does not recommend buying the stock.
The thesis hinges on what happens after the earnings dust settles. If large enterprise customers have pulled forward two years of compute demand into the first half of 2026, as Morgan Stanley’s own internal procurement team is reportedly doing, then second-half orders thin out just as memory prices peak. Margins compress. The multiple corrects.
For investors holding Dell shares into the report, the practical question is whether the stock can absorb a strong quarter without falling on the guide. Morgan Stanley’s bull case of $272 implies just 12% upside from here. The bear case implies a 55% drop. That is the asymmetry Woodring is trying to flag.
Dell investors do not need to agree with the call. They do need to read what comes after the price target.
Related: UBS resets Dell stock price target ahead of earnings
