Dell's Sell-Off May Be Overdone Ahead of Earnings This Week
Posted by Cassie Slane on Fri, Nov 14, 2008 @ 01:01 PM

Last week capped off another
volatile session with wild moves in the major averages and expect a similar
story this week. In addition to earnings, investors will continue to digest
recent changes to the Troubled Asset Relief Program and the future of automakers.
A measure of prices on the consumer and producer level will also give investors
a look at inflation.
In the coming week, earnings
reports will trickle out as investors have yet to hear from the two largest
home-improvement chains, Lowe's Cos. (LOW) and Home Depot Inc. (HD), as well as
PC giant Dell Inc. (DELL).
Lowe's releases its
third-quarter results before the market on Monday and is expected to report a
35% decline in profit to $0.28 per share on revenue of $11.6 billion. The
second-largest home improvement chain has a tendency to narrow or reverse its
pre-market move in the regular session following an earnings release, doing so
in three out of the past four quarters. Shorts may want to find a level of
resistance in the pre-market if the stock makes a move to the upside. On August
18, Lowe's shares rose 3.6% in the pre-market after the company's
second-quarter results beat the Street. However, shares ended the regular
session down 0.2% as investors focused on the mixed guidance.
Dell reports results after
the close on Thursday and the second-biggest maker of personal computers is
expected to report a third-quarter profit of $0.33 per share, down from $0.34 a
year ago, on sales of $16.5 billion. Shares of Dell touched their lowest level
in more than ten years on Thursday as investors see signs that the PC industry
is floundering in the weak economy. Investors wanting to trade into earnings on
Dell should know that the stocks has outpaced its after-hours moves in next-day
regular session trade in three out of the past four quarters. The trend has
been negative with the stock moving lower in three out of the past four
quarters. However, with the stock trading at a PE of 7, it may have little
downside risk left. On August 28, Dell shares slid 9.7% in after-hours trading
after earnings missed the Street. The stock widened its move in the following
regular session, closing down 13.8%.