I just jumped into Dell in November. I am planning on buying some more stock. I am new to this investment business outside of 401ks and index mutual funds.
What does Dell typically do around splits? Does it keep rising until the split ? What does it typically do after a split ?
This is assuming nothing outside hits the market as a whole. I am just trying to understand the whole split issue. I saw what happened to MSFT and CPQ. MSFT kept rising and then had a big rise today after the split.
To me,it appears that the odds are good that Dell could hit 140-150 sometime in March.
Dell runs up big from split announce to actual split date historically. 30% or more. Last split it was almost 100%. It's already run up 15% so I'm expecting another 15% before March 6th which will put it in the range of $140-$150. After splitting it runs up some more, but not as much, as small investors are attracted to the lower share price. Call it $80 in the weeks following the split.
I expect the stock to take a breather from there, maybe retracing 10%. Earnings released in May will give it small shove back up to $80 range then I expect some big news in the summer to fuel a rally up to $100 by October. If the market and the price is stable then we can probably expect another split in October, another rally to $120, a split to $60, and then profit taking back down to $50.
Adjusted for splits that would translate to a 1JAN98 open of $85 and a 31DEC98 close of $200. Of course this may not be enough to get Michael Dell the top S&P 500 CEO award for a third year running so maybe he'll have enough positive surprises to nudge it a little higher.
On the downside I don't expect it'll do any worse than another 25% up from today's price - call it a split adjusted $160 in December.
Of course any bad news coming out of the company can cause a major selloff but it's hard to imagine any news bad enough to drive it below $100. The company predicted a good year with lots of opportunity and it doesn't have a history of disappointing performance. Last bad quarter was in 1993 when it was a lot younger company experiencing growing pains as it transitioned from a smaller company to a multi-billion dollar business. The Direct model had not been refined at that point and a big error in 1992 was an aborted effort to get into the retail market. The company has been doing fantastically after it re-dedicated itself to the Direct model.
Thank you Zim for your well thought out message. We are all here with the same goal, to make money in stocks, and the ridiculous, petty fighting between longs and shorts just hurts the board and doesn't get anyone anywhere.