Can Dell Surge Higher?

With shares of Dell (NASDAQ:DELL) trading around $13, is DELL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Dell is a global information technology company that offers its customers a range of solutions and services delivered directly by Dell and through other distribution channels. The company operates in four segments: Large Enterprise, Public, Small and Medium Business, and Consumer. Dell serves a wide range of customers: global and national corporate businesses; educational institutions, government, health care, and law enforcement agencies; small and medium-sized businesses; and end users. Through its four segments, Dell is able to provide information technology products to a growing user base around the world. As economies continue to develop, look for a company like Dell to provide important technology products for years to come.

T = Technicals on the Stock Chart are Mixed

Dell stock has struggled to make any significant progress over the last several years. The stock is now trading near the middle of a range extending back to mid-2009. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dell is trading between its key averages which signal neutral price action in the near-term.

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(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Dell options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Dell Options	25.23%	86%	85%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
July Options	Flat	Average
August Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Dell’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dell look like and more importantly, how did the markets like these numbers?

	2013 Q1	2012 Q4	2012 Q3	2012 Q2
Earnings Growth (Y-O-Y)	-80.56%	-29.00%	-44.90%	-12.50%
Revenue Growth (Y-O-Y)	-2.41%	-10.71%	-10.70%	-7.50%
Earnings Reaction	-0.22%	0.21%	-7.32%	-5.34%

Dell has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have not been too pleased with Dell’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Dell stock done relative to its peers, Hewlett-Packard (NYSE:HPQ), Apple (NASDAQ:AAPL), International Business Machines (NYSE:IBM), and sector?

	Dell	Hewlett-Packard	Apple	International Business Machines	Sector
Year-to-Date Return	32.15%	67.37%	-24.35%	1.80%	25.46%

Dell has been a relative performance leader, year-to-date.

Conclusion

Dell is a global information technology company that provides valuable solutions to consumers and companies. The stock has not seen much progress in recent years and is now trading near the middle of a multi-year range. Over the last four quarters, investors in the company have not been too pleased as earnings and revenue figures have decreased. Relative to its peers and sector, Dell has been a year-to-date performance leader. WAIT AND SEE what Dell does the remainder of this quarter.