When compared to consumer tech giant Apple, we said that Dell Technologies (NYSE: DELL) stock was a stronger investment back in October 2020. (NASDAQ: AAPL). Eight months later, the trade has performed rather well, with Apple stock up just over 10% and Dell stock up about 50% since our advice. Over the same period, the S&P 500 has increased by nearly 22%. Therefore, on October 9th, when we released our research below, if you had invested $10,000 in Dell Stock and $10,000 in Apple Stock (a net investment of $0), your account would have increased by nearly $4,000 in value. That is a rather respectable return.
With the remote work and learning trends continuing to drive demand, Dell has benefitted from robust sales of both its business and consumer PCs. Over the previous three quarters, the firm has greatly outperformed street expectations. Revenue increased over Q1 FY'22 (financial years end January) by a strong 12% to a first-quarter record $24.5 billion. Separately, Dell disclosed intentions to sell off its 81% interest in leading virtualization and cloud computing company VMWare. This move might create wealth for shareholders and help Dell pay down debt.
Approximately one-third of Apple's revenues were made by Dell in FY20, with revenues of $92 billion. Apple generated $274 billion in sales during the previous four quarters. However, during the past three years, Dell's growth has outpaced Apple's, in part due to the acquisition of EMC (which was completed in mid-FY'17). Compared to Apple's 6% annual growth rate, Google's revenue increased at an average rate of 14% between FY17 and FY20 (from $62.2 billion to $92 billion).
Regarding profits, Dell has net income margins of roughly 6%, whereas Apple, a model of success, has net income margins of over 20%. Given that its product and service ecosystem helps to retain customers, Apple's revenues are also probably more predictable. Dell, in contrast, competes fiercely in markets that are more commoditized. In contrast, Dell's return metrics have been improving over the past several years while Apple's returns have stayed constant or decreased. Additionally, the corporation may be able to increase profits in the future through increased software-related revenues.
Dell has a lot more debt, and its corporate structure and business are probably not as clear to investors, but values are still looking good. In addition, the business is considering spinning off its nearly 81% stake in VMware, a move that may generate substantial value. Given that VMware has a market valuation of more than $60 billion, Dell's share is worth $50 billion. That closely corresponds to Dell's current market worth, which suggests that investors may effectively receive the remaining portion of the company at no cost.