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Will Dell Get Kicked While It's Down?

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Lower-than-expected margins could get the shares a swift hit.

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There's nothing like a holiday-shortened week.

Asian stocks got pummeled overnight. The Hang Seng and the Nikkei were off 2.59% and 2.05%, respectively. European stocks were more of a mixed bag early this morning. And here in the US, we're currently trading lower.

Here's what I'm seeing this fine Friday morning:

Dell (DELL):
The Texas-based computer giant was out with its fourth-quarter numbers after the bell last night. To its credit, it put up $0.28 per share, excluding items, which was a penny better than Street expectations. It also beat on the top line, however there's some fairly heavy hand-wringing going on over its lower-than-expected margins.

Some quick thoughts on the big picture:

1. If I had to chose between Dell and Hewlett Packard (HPQ), which of course reported the other day, I'd have to go with HP at this point. But the Dell quarter wasn't totally awful and I'm thinking a sell-off in today's session could create a nice little opportunity. Under 12 times the current estimate is reasonable given the company's potential for future growth, knack for making it through tough times, and decent (though not terrific) position.

2. A little open-market insider buying in 2010 sure would be nice about now. For what it's worth, the data indicates that Mr. Dell belied up at $20 and change back in September 2008, so I'd say he has a fair incentive to try to get the stock price moving from the mid-teens.

3.
Given the after-hours Fed news last night, maybe a lot of people won't be paying attention to the margins? Unfortunately, I doubt that's the case. I think the shares take a pretty swift hit at the open.

Intuit (INTU):
The TurboTax company was out with its second-quarter numbers. It earned $0.38 per share excluding items in the period, which was pretty nice because analysts were expecting just $0.32. Moreover, in the release it indicated that it's looking for the following in fiscal 2010: "Non-GAAP diluted EPS of $1.97 to $2.04, growth of 8 to 12 percent."

My feel:

1. It was a solid quarter and the company is looking for some solid growth, which is great. In addition, it's been consistently whipping the tail off of estimates.

2. This isn't the sexiest story by any stretch, but I do see some potential upside here. My gut tells me that management's outlook could well end up being conservative, and that a stock price a year out in the mid- to high-$30s is possible.

Best Buy (BBY):
Justin Sharon points out that JMP slapped a Market Outperform rating on the electronics chain.

Some thoughts:

1. Although I appreciate Radio Shack's (RSH) recent rise and have to think that Walmart (WMT) will be a major player in the electronics business in the future (which I admit is a bit of a worry), I continue to like Best Buy and remain fond of the stock. I'm not certain, however, about the impact the research coverage will have on the shares in today's session.

2. I feel the company has the potential to keep whipping estimates, and that it's just a matter of time until the shares once again head north of the $40 mark.

Disney (DIS)
Jefferies placed a Buy rating on the entertainment giant, as discussed in Justin Sharon's article, Upgrades & Downgrades: Disney Is More Beauty Than Beast.

I've been a big bull on the stock and I remain so. With folks more likely to travel around the US in 2010 and 2011 -- including to Disney's theme parks and properties -- and the better advertising environment, I believe the investment community will start to cozy up to the stock. I also see upside potential here over the next few years despite what the naysayers may say.

Have a great day and an even better weekend!
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No positions in stocks mentioned.

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