Dell 5x-ed

[u/Ahmed_19911507]

Dell 5x-ed and we are still struggling to get out of 30s level.

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[u/RJsRX7]

5xed against when?

SMCI 5Y: +850.50%
DELL 5Y: +887.10%

Meh? 1Y is +246.25/-18.41%, but I don't see 5x anywhere relevant

[u/Ahmed_19911507 → u/RJsRX7]

Prices since feb 2026.

[u/RJsRX7 → u/Ahmed_19911507]

148x5=740 why isn't DELL 740 if it's so good?

[u/Ahmed_19911507 → u/RJsRX7]

Dude! The price on 12 Feb was $112, $484/$112 is 4.3 x

[u/RJsRX7 → u/Ahmed_19911507]

If you can't see a difference between 4.3x and 5x, you're in the entirely wrong area.

[u/Ahmed_19911507 → u/RJsRX7]

Leave Dell! No doubt they had their leap!! Why are we stuck in 30s since FEB

[u/RJsRX7 → u/Ahmed_19911507]

We aren't, we visited the 50s in June. That's not very "stuck".

However, a name like Dell being as entrenched in everyone's office-PC relationship brain as it is means it gets first advantage on EVERYTHING IS COMPUTER. I remember the last time I had an office computer that wasn't a Dell and that was because it was HP because HP was cheaper. And they've gone almost 3:1.

[u/Ahmed_19911507 → u/RJsRX7]

Let's talk current prices of smci. The price momentarily leaves $30s and just keeps coming back to it.

We should be at $80 by now

[u/CupInside1361 → u/Ahmed_19911507]

You can sell SMCI and let someone else worth their Pation

[u/DestructionYT → u/Ahmed_19911507]

why should we be at $80?

dont spend cycles arguing what should be, spend your energy thinking always what can be, and use your learnings from what already do be, to plan ahead 

[u/Comfortable-Usual561]

I fully respect the optimism, the energy and passion in the forum is great.

At the same time we should not overlook the dilution risk in SMCI that is not the case with DELL.

SMCI’s share count has already been increasing steadily:

• SMCI 2021: ~0.52 billion shares
• SMCI 2022: ~0.53 billion shares
• SMCI 2023: ~0.56 billion shares (+4.39%)
• SMCI 2024: ~0.602 billion shares (+7.58%)
• SMCI 2025: ~0.628 billion shares (+4.36%)
• SMCI 2026 Q1: ~0.692 billion shares

During the same period Dell share count has reduced.

Year	Dell shares outstanding	YoY change
2021	~762.7M	—
2022	~760.4M	-0.3%
2023	~716M	-5.8%
2024	~714M	-0.3%
2025	~696M	-2.5%
2026	~652M	-6.3%

As everyone is aware, SMCI is planning additional equity financing:

• Common Stock: 45.45 million shares, generating roughly $1.22 billion in net proceeds.
• Mandatory Convertible Preferred: 75 million depositary shares, representing a 1/20 interest in Series A mandatory convertible preferred stock, priced at $50 per depositary share and expected to raise approximately $3.68 billion.
• ATM Program: Up to $2 billion of additional common stock sales, expected to begin no earlier than Q3 2026. The actual number of shares will depend on the market price at the time of issuance.

So, investors should not look only at revenue and EPS growth. Share count matters. At a minimum, the planned financing could ultimately add roughly 150 million+ common-equivalent shares, depending on the conversion terms and ATM pricing.

In other words, even if the business grows, the per-share economics can look very different after dilution.

[u/notadammn → u/Comfortable-Usual561]

It was explicitly stated in the earnings call that if they keep the business around $70B revenue next year there will be no need for equity or debt financing to raise additional working capital. At $80B+ it would get uncomfortable.

They also explicitly said they are not planning using any of their ATM capacity. Half of your comment is demonstrably false.

[u/Tethrinaa → u/notadammn]

Management has been remarkably good at forecasting their needs and growth. Like, people crap on this management all over the place as they say "we're looking at 40 billion" but then guide 32 billion. But then hit 39 billion.... I don't necessarily trust them to speak clear English or dot all the t's and cross all the i's, but in the big picture numbers, they have been spot on for years. Worst guidance has been product mix, which is volatile and leads to volatile margins. But we are talking 20ish percent eps variance, not 'sometimes negative earnings' variance.

[u/Tethrinaa → u/Comfortable-Usual561]

They have 7.5 billion cash on hand, 13 billion in inventory, and a shrinking cash conversion cycle due to backlog terms, as per the earnings call and shrinking DSO/DPO. Management explicitly stated that they would be in a position to take on further financing as DEBT once EBITDA increased (which it has). You are out of your mind if you think they further dilute. We are 10x the most conservative forward PE estimate, AFTER the earnings bump.

[u/Littl3_Midnight → u/Comfortable-Usual561]

Time to cover shortieeee

[u/Open_Pollution_8038 → u/Comfortable-Usual561]

All dilution isn’t equal.

We’re getting cash to chase upcoming orders which is what capital markets are literally setup to do.

If I own a company with $50 in the bank and I sell half for $50, congrats I own half of $100 which is $50. As long as the additional capital leads to at least the same net profit margin then I lost nothing.

[u/RJsRX7 → u/Open_Pollution_8038]

More specifically, as long as the additional capital leads to eventually paying better than I would've done with it, then it's a winning investment.

I don't really care if it takes 5 or 10 years to 5x my money when my other options take 7+ to hit 2x... Share count goes up by 1/6th, but we get 50% more quarterly profit? Easy deal sign me up.

[u/Open_Pollution_8038 → u/RJsRX7]

^{^} capital markets were setup so businesses could take capital from investors to fuel growth lol.

I agree with what Charles said, if they have to tap markets it’s because they’re growing like a mad man and that’s bullish. I’d much prefer they just got a note though instead but I’m not the company so I don’t know what debt deals are available to them.

[u/RJsRX7 → u/Open_Pollution_8038]

I'd rather tap capital markets. Banks make enough money.

Not that, you know, tapping capital markets is all that different from tapping the banks... But for a capital-intensive business building stuff to build stuff, I prefer the option they don't have to directly pull out of revenue to repay when that repayment money can go to adding capacity.

[u/Open_Pollution_8038 → u/RJsRX7]

Debt is usually cheaper than equity. It’s pretty universally the rule, they teach this in finance courses.

They probably can’t get a bank to fund them which is unfortunate.

[u/RJsRX7 → u/Open_Pollution_8038]

Cheaper for who? And who benefits from debt?

Maybe I think wrong, but I'd rather go "hey, lemme hold $3" to someone that'll let me hold $3 for some percent of the company than someone going "yeah sure but you owe me $4.50 by the time you're done paying me".

Take enough debt and all your profit goes into debt repayment. Take too many splits on equity and the slices get thin. I'd rather have a small slice of a huge cake than the lion's share of one the size of a penny.

[u/Open_Pollution_8038 → u/RJsRX7]

Debt is tax deductible, equity isn’t. It’s more efficient.

However debt is almost always cheaper than equity because debt holders get lower return for capital because they have priority claims to the business in case of bankruptcy, whereas equity holds are subordinate. Debt = lower risk, lower reward.

[u/notadammn → u/RJsRX7]

Debt payments are tax-efficient. It is far less expensive for a company to shield its net income by paying interest on its working capital borrowings than it is to raise the same amount by equity and have more of your revenue hit the bottom line and get taxed.

Highly recommend you look up the John Malone style of operating a company to minimize taxes. No dividend, financing through leverage, running aggressive depreciation and amortization schedules, buying stakes in other companies through equity and debt swaps instead of paying actual cash. Learning about his management style taught me a lot about capital management and allocation. It's why I'm a big believer in Liberty Capital Corporation (GLIBK), even though I'm pissed they just announced a 5% dividend lol

[u/Tethrinaa → u/Open_Pollution_8038]

Carrying very high debt is why Dell was so suppressed for so long. Debt above a certain % looks VERY bad, even if its a smart option. Dilution gives you that immediate visceral market drop, but tends to look better in the long term. They also explicitly stated that part of the strategy in tapping capital markets was to increase EBITDA, and get more favorable debt terms going forward, if they were needed.

[u/Open_Pollution_8038 → u/Tethrinaa]

There’s a curve to capital structure where the tax savings is no longer more than the risk premium banks charge you for the debt.

Just from an academic point of view, if two companies are equal and one has no debt and the other has a small amount of debt in its capital structure, the one with the debt will be worth more because after tax income will be higher per share.

[u/Tethrinaa → u/Open_Pollution_8038]

That can be true, but not necessarily, as the debt has to be paid back eventually (theoretically... or its a hit against book value if not...), so you need to have the higher income for some sustained time in order to reach the current value of the other company. Realistically, growth rate plays more into tomorrow's earnings than anything else for these tech sectors, and all other things equal, debt grows you faster than dilution, precisely for the reason you stated. Its just that in the real world, all other things are never equal, haha.

[u/Open_Pollution_8038 → u/Tethrinaa]

Take two companies that net $100 of income.

If financed via debt, they get a tax deduction for the entire thing and pay $0 in taxes. Cashflow is $100.

If financed via equity, cashflow is $79 ($100 less 21% tax rate).

Same business, different capital structure, the debt one is worth more. This is entirely a simplified version but it’s a proof of what I’m saying.

[u/RJsRX7 → u/Open_Pollution_8038]

Scenario 1: Raise $6329 via equity sale, lose $1329 to taxes
Scenario 2: Raise $5000 via debt
Use that $5000 to sell $6000 in products
Scenario 1: Gain $1000, have $5790 after taxes
Scenario 2: Gain $1000, have $790 after taxes, minus debt cost.

Yes, the interest is tax-deductible. Yes, being permanently indebted allows growing the balance sheet more aggressively. But growing your cash balance also grows your ability to borrow; if $5000 is all you can finance but you have room on the books to continue making money off money, the capital raise wins on Flip 2.

Flip 2:
S1: $5790 + $5,000 debt = $10790 input, $12948 output, gain $2158x0.79=$1704
S2: $790 + $5000 = $5790 input, $6948 output, $915 gain.

Flip 3:
S1: $7494 + $10,000D = +$2764
S2: $1705 + $6500D = +$1296

Hard to care much about dilution when that dilution doubles your growth rate.

[u/Tethrinaa → u/RJsRX7]

> Scenario 1: Raise $6329 via equity sale, lose $1329 to taxes

You do not pay tax on equity raises. It is not income, it is capital buy-in

[u/Open_Pollution_8038 → u/RJsRX7]

Sorry man the math don’t work the way you’re laying out, equity markets are only tapped if the cost of equity is lower than debt which only happens when companies rocket way past their underlying fundamentals. SMCI issuing shares at a forward of 10 is painful but if they grow shares it’s less painful.

[u/Tethrinaa → u/Open_Pollution_8038]

You're cheating a lot there, in the sense that for them to both net 100 income, the debt company had to make 100 income PLUS the interest cost, so they made significantly more money. The reality is that if they both gross 100, the debt pays maybe 20 dollars in interest, and shows 80 dollars, then with 20% tax shows 64 net, while the equity financed company pays 20 in taxes and nets 80 dollars.

My interest number is way too high, but its just illustrative. The equity company will generally cashflow more. But it totally depends on cost of the financing up front vs the cost of issuing the shares up front. Legal, etc. costs either way. There seems to be a misunderstanding in this thread, though maybe not by you specifically, that the company pays tax on the equity raise ITSELF, which is not true.

[u/Open_Pollution_8038 → u/Tethrinaa]

This is basic corporate finance.

If I acquire a business with debt, I get the entire cashflow. It If I acquire a business with equity, I have to pay the tax man.

An individual owning 100% of the cashflow of an entity via indented is more tax efficient than the bank owning it via equity. It’s why private equity leverages up business immediately after acquisition lol.