Dell Technologies Inc. (DELL) has confirmed that it is exploring a spin-off of the majority-held VMware, Inc. (VMW), the lifting of Dell stock to a 14-month high while VMware sold. The discrepancy makes sense because the parent has little to lose in the transaction and much to gain, while the child is already fully valued. The company noted that the spin-off discussions are currently in the exploration phase, but the initial reaction from Wall Street has been very positive.
Dell stock has under-performed badly after the December 2018 initial public offering (IPO), the expenses of the majority of the past 19 months, trading below the $46 POPE opening print. This default behavior has encouraged the market players to ask why Michael Dell has chosen to abandon private status after the deletion of the company from the Nasdaq 100 in 2013. The founder must have wondered the same thing, with rumors about a sale swirling just two months after the offer.
Dell currently holds an 81% stake in VMWare, which is to be valued more than the parent. Analyst Cowen Krish Sankar raised his price target on the shares to $63 from $60 Friday morning, noting that the transaction could happen as early as the month of September 2021, adding, “we estimate basic Dell could be valued at $31, and the VMW stub to $64.” However, he warns that “the unlocking of this value depends on the negotiation of an agreement between the two companies and a special dividend for the debt.”
Dell Technologies Daily Chart (2018 – 2020)
The stock sold in the low $40 after December 2018 offer and turned over, breaking out to a new peak in February 2019. Constant to the interest of buyers stuck in the upper part of $60 in May, ahead of the all-time high print at $70.55 a few weeks later. Aggressive sellers then took control of the ticker tape, the removal of stock in the ipo of the opening print in August. A small increase of the failure in the middle of$50 in September, completing a trading range that has held intact in a February 2020 ventilation.
The sharp decline recorded an all-time low at $25.51 in March, in front of the vertical to the impulse purchase, which, initially, was awarded to broken range support in April. Positive price action finally moved up to this level in the month of June, at the same time, it gapped above the 200-day exponential moving average (EMA). This week the purchase of the spike raised above July 2019 range resistance before retreating at the close of Thursday evening. The stock is trading down on Friday, the strengthening of the resistance in the upper $50.
The Dell Technology Outlook
The balance volume (OBV), the accumulation-distribution indicator topped in May 2019 and has failed of September and November escape attempts. OBV finally allowed the barrier in June 2020, the lifting of all time while increasing the chances that the price will eventually follow. A drop of the red line should provide a buying opportunity in this scenario, may be taking place at the same time as a decline of the closely aligned 50 and 200-day EMAs.
A Fibonacci grid is spread through the May 2019 March 2020 downtrend indicates that the price has been stair harmonic levels since the month of March, a reversal at the .786 retracement level of Thursday. Unfortunately for recent buyers, a reversal of the situation at this level often prints the high or low that goes unchallenged for weeks or months, increasing the chances for a pullback in the coming weeks. Sidelined investors not to complain if this occurs, using the drop to buy more on the dip” to a major support.
The Bottom Line
Dell Technologies stock has raised the highest since May 2019 after the confirmation speaks of VMWare spin-off.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.