Citi Names Dell Technologies Stock a Top Pick as PC Demand Surges

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Dell

Technologies stock has had a strong year, rising more than 40% amid surging PC demand and growing speculation that the company will spin off its controlling stake in VMware toward the end of 2021. Citi says next year will bring more of the same, making Dell a favorite stock pick.

Hardware analyst Jim Suva on Monday named Dell (ticker: DELL) his top stock for 2021, adding the company to Citi’s “U.S. Focus List.”

“Our 2021 outlook is based on our view that the consumer strength recently experienced will be stronger for longer as demand for many products such as PCs, tablets, video cameras, wearables, and

Apple

products goes beyond the holiday season and sets up for a stronger than normal 2021 first half,” Suva wrote a in research note previewing the outlook for the computer hardware sector.

He sees near-term PC strength for Dell, with a pick-up in enterprise demand in the second half. He expects the “added bonus” of a

VMware

(VMW) spinoff, accompanied by a special cash dividend to Dell from VMware of about $10 billion, which the company would likely use to pay down debt. Dell has previously said it is considering spinning off its VMware stake.

Suva raised his target price on Dell to $90 from $82. Dell shares on Monday were recently down 1.2% to $72.08.

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In the report, Suva also names the contract manufacturer

Jabil

(JBL) as his top mid-cap pick, and the customer digital printer

Kornit

Digital (KRNT) as his top small-cap pick. He lifts his target price on Kornit to $100 from $70, while also raising targets on Buy-rated

Flex

(FLEX) to $21 from $17, and Buy-rated

Logitech International

(LOGI) to $105 from $100.

Suva maintained his Sell ratings on

Xerox Holdings

(XRX), Hewlett Packard Enterprise (HPE), and

GoPro

(GPRO), as well as on

CommScope

(COMM), and

Juniper Networks

(JNPR) in the communications hardware group.

Last week, Suva upped his target price on Buy-rated

Apple

(AAPL) to $150 from $125. He remains Neutral on

HP Inc.

(HPQ), on concerns that the second half of the year will see difficult comparisons—given the very strong last two quarters of 2020 on pandemic-driven demand.

Write to Eric J. Savitz at eric.savitz@barrons.com