The last day of May was awful for Dell Technologies (DELL 2.90%) shareholders. Traders panic-sold Dell stock that day, sending it 17.9% lower to $139.56. It was an instance of Dell Technologies' sales in a key segment being really good, but still not good enough for an ultra-optimistic market.
Still, a big-picture view reveals that Dell stock may have been due for a pullback and, quite possibly, traders were only looking for an excuse to take profits.
A victim of great expectations
On May 31, Dell Technologies released its results for the first quarter of fiscal 2025 (ended May 3, 2024). The company's sales grew 6.3% year over year to $22.2 billion, versus the analyst consensus estimate of $21.6 billion; moreover, Dell's adjusted earnings of $1.27 per share exceeded Wall Street's call for earnings of $1.23 per share. Dell's AI-optimized server order backlog grew more than 30% sequentially to $3.8 billion.
Wall Street wasn't impressed, however. According to Mizuho analyst Jordan Klein, Dell Technologies' artificial intelligence (AI) server backlog "missed the high buyside bogey" of $4.5 billion to $5 billion.
Still a long-term winner
Dell Technologies' AI server backlog miss might seem like a flimsy excuse for the market to give Dell stock a 17.9% haircut. Yet, maybe some profit-taking was overdue after the stock's relentless yearlong run-up.
If Dell Technologies stock traded at around $45 a year prior, then even after the May 31 price drop to $139.56 the stock still gained 210% in 12 months. Thus, Dell's investors would have turned $1,000 into $3,102 in a year, and that's not even counting the dividend distributions it made along the way.
In other words, the long-term trend is still Dell Technologies investors' friend. With Dell's quarterly total sales and income beating analysts' expectations and a bout of profit-taking bound to have happened sooner or later, the bulls certainly aren't required to flip bearish on Dell Technologies now.
