Buy Dell and TD SYNNEX shares in 2025, avoid IBM, Pure Storage: UBS

Investing.com — Dell (NYSE:) and TD SYNNEX (NYSE:) are UBS’s top picks for 2025, while IBM (NYSE:) and Pure Storage (NYSE:) are listed as least favored, the bank revealed in its enterprise hardware and networking sector outlook.

UBS names Dell as the preferred large-cap stock for the year, noting it “should be a winner in the AI server market relative to peer Hewlett Packard Enterprise Co (NYSE:) across Tier 2 Cloud and Enterprise markets,” the report states.

UBS anticipates at least 10% revenue growth in Dell’s Infrastructure Solutions Group (ISG) for 2025. Furthermore, a projected recovery in the PC market by at least 5% is expected to push Dell’s free cash flow up 15% for the year and into low double digits in 2026.

With the company’s shares trading at 12% of estimated 2026 free cash flow (FCF), “the risk-reward is highly favorable given the synchronous recovery in end-markets next year,” UBS analysts led by David Vogt said in a note.

Meanwhile, TD SYNNEX stands out as the firm’s preferred mid-cap stock. UBS forecasts 5% growth in billings, driven by recovering end markets in PCs, networking, servers, and storage.

The company is also expected to return 50% of its FCF to shareholders through dividends and buybacks, shrinking its share count by approximately 5% and driving 10% earnings per share (EPS) growth.

Analysts also highlight the strength of TD SYNNEX’s AI infrastructure business, Hyve, which is projected to reach several billion dollars in revenue with operating margins exceeding corporate averages.

“As the market properly values this unit, we expect TD SYNNEX’s price-to-earnings (P/E) multiple to expand from 9x to more in-line with legacy tech peers around 10-12x,” analysts said.

On the other hand, analysts advise against IBM and Pure Storage stocks in 2025, citing limited upside.

The note highlights that while AI-driven growth is selective, IBM and Pure Storage have minimal exposure to AI revenue for the year.

“While heavily exposed AI names should see upward revisions in CY25, we expect limited upside revisions (absent acquisitions) at IBM, Apple (NASDAQ:), and Pure Storage given de minimis AI related revenue/exposure in 2025,” analysts highlighted.

UBS also highlights IBM’s second-half-weighted 2025 earnings profile and the risk of a Q1 EPS miss, calling it “an unfavorable risk/reward in our view” with the stock trading at 21x next twelve months (NTM) consensus EPS.

Meanwhile, Pure Storage’s share loss in all-flash and soft demand for Everrgreen//One subscriptions represent growth headwinds for 2025, analysts said.