Dell Stock Looks Cheap Here With Higher Analyst Forecasts - Short Put Plays Are Attractive

Analysts have raised 2027 revenue estimates for Dell Technologies Inc. (DELL). This implies higher FCF and price targets. As a result, selling short out-of-the-money (OTM) puts is an attractive play now. For example, a 10% OTM put expiring in one month yields 4.9%.

DELL closed at $409.07 on Monday, June 15, up 3.4%. The stock has come down from a peak of $465.96 on June 1, after its May 28 earnings release for its fiscal Q1 ending May 1.

Revised Price Target

I discussed its earnings, free cash flow (FCF), and my price target in a June 1 Barchart article, “Dell Stock Could Be Worth 30% More - Based on Strong AI Demand and FCF.”

My price target for Dell stock was $571.80 per share, based on an FCF estimate of $13 billion (using a 7.05% FCF margin on analysts' revenue forecasts of $184.32 billion), and a 3.5% FCF yield metric.

However, since then, analysts have upped their revenue forecasts to $188.37 billion, over $4 billion more. That allows me to raise my price target.

For example, the new FCF estimate will be $13.18 billion (i.e., 7% x $188.37b). Using a 3.5% FCF yield metric, Dell could be worth over $376 billion:

  $13.18b FY28 / 0.035 = $376.57 billion fair market value (FMV)

This is 42% higher than Dell's existing market cap of $265.12 billion, according to Yahoo! Finance's calculation. As a result, the new price target (PT) is 42% higher than today's price:

  $409.07 x 1.42 = $580.81 PT

That is $9 higher than my prior PT. Moreover, other analysts have higher PTs as well. For example, Yahoo! Finance shows that 27 analysts have an average PT of $483.83 per share, and Barchart's survey shows an average of $485.95.

However, there is no guarantee DELL will hit these targets. One way value investors find it attractive to play DELL stock is to sell short out-of-the-money (OTM) puts for a one-month expiry period. That way, an investor can earn income while waiting for a lower potential buy-in point.

Shorting OTM DELL Puts

For example, the $370 strike price July 17 expiry put option contract has a midpoint premium of $18.20. That strike price is almost 10% below Monday's close (-9.55%).

DELL puts expiring July 17 - Barchart - As of June 15, 2026

It means that an investor who shorts this put option has a one-month yield of 4.92% (i.e., $18.20 / $370.00 = 0.04919).

Downside Risks and Issues

Moreover, the potential buy-in point is significantly lower, i.e., $370-$18.20, or $351.80. That is 14% below today's price, but would only occur if DELL falls to $370 on or before July 17.

However, there is a risk that DELL could fall below $351 before July 17. In that case, the investor's account would be assigned to buy 100 shares at $370. But the account could have an unrealized capital loss, especially if DELL stays below $351.80

Nevertheless, the investor knows that their potential upside is significant, given the higher price targets. The investor could hold the shares or even sell covered calls to help mitigate any unrealized loss. 

Or they could repeat this one-month short-put play. For example, over 3 months, the expected return, if it can be repeated, is 14.76% (4.92% x 3). That is the same as owning shares and seeing them rise to $470.10.

The bottom line is that DELL stock looks cheap here, and one attractive way to play is to sell short out-of-the-money puts for a one-month expiry period.