DELL -- Time to Buy ????

[adios]

Don't laugh too much now. Not one of my types of stocks but I'm seriously thinking about DELL here. DELL had a revenue and earnings warning the other day:

Dell slumps after cutting sales outlook

Lowest PE I've seen for a long time on this one. There was an article in Wednesdays WSJ regarding the problems PC makers including DELL have had in their consummer electronics initiatives. It may or not work out for DELL in the long run but I don't see this warning as amounting to much. I think this one would require some patience but I'd be looking for a target price of $40 or so. Thoughts?

[JTrout]

from Standard & Poors:
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Investment Rationale/Risk November 02, 2005

We recently lowered our opinion on the shares to hold, from strong buy. Dell's results have recently been challenged by a shift in the industry toward lower-end PC products, in our view. While, Dell has been able to take advantage of a lower cost structure vs. peers, reflecting the cost advantages of its direct sales model, we believe the company is witnessing new and more aggressive competition, due to changes in the competitive landscape, such as the sale of IBM's PC business, as well as management transition issues at Hewlett-Packard (HPQ: hold, $28). Still, with the company's solid focus on asset management, enabling it to generate strong cash flow from operations, in our opinion, we believe the shares are worth holding.

Risks to our opinion and target price include market share losses as its peers improve their cost position in PCs, a slowdown in technology spending and a moderation of printer market share gains.

Our 12-month target price of $34 is based on our discounted cash flow (DCF) and price to sales ratio analyses. Our DCF model assumes free cash flow growth of 9% for the next 15 years and a weighted average cost of capital of 13%. On a price to sales basis, we value the shares at slightly below their recent historical trading range, due to what we view as recent execution missteps, or roughly 1.5X our FY 06 revenue per share estimate.
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