Investing.com – Dell (NYSE:) and TD SYNNEX (NYSE:) are UBS' top picks for 2025, while… IBM (NYSE:) and Pure Storage (NYSE:) are listed as least favourable, the bank revealed in its outlook for the enterprise networking and hardware sector.
UBS rates Dell as a large-cap stock favorite of the year, noting that it “should be a winner in the AI server market compared to its peers.” Hewlett Packard Enterprise (NYSE:) across cloud and enterprise tier 2 markets.
UBS expects Dell's Infrastructure Solutions Group (ISG) 2025 revenue growth of at least 10%. Furthermore, an expected recovery in the PC market of at least 5% is expected to push Dell's free cash flow up 15% for the year and into the low double digits in 2026.
With the company's shares trading at 12% of its estimated 2026 free cash flow (FCF), “the risk reward is very favorable given the synchronized recovery in end markets next year,” UBS analysts led by David Vogt said in a note.
Meanwhile, TD SYNNEX stands out as the company's favorite mid-cap stock. UBS expects 5% growth in billings, driven by recovering end markets in computers, networking, servers and storage.
The company is also expected to return 50% of free cash flow to shareholders through dividends and buybacks, reducing its share count by about 5% and driving EPS growth of 10%.
Analysts also highlight the strength of TD SYNNEX's AI infrastructure business, Hyve, which is expected to reach multi-billion-dollar revenue with operating margins exceeding corporate averages.
“As the market correctly values this unit, we expect TD SYNNEX's price-to-earnings (P/E) multiple to expand from 9x to more in line with legacy technology peers at around 10-12x,” the analysts said.
On the other hand, analysts advise against trading IBM and Pure Storage shares in 2025, citing limited upside.
The note highlights that while AI-led growth is selective, IBM and Pure Storage have minimal exposure to AI revenues for the year.
The analysts highlighted that “while heavily exposed AI names should see upward revisions in year 25, we expect limited upward revisions (absent acquisitions) in IBM, Apple (NASDAQ:) and Pure Storage given minimal revenue/AI exposure in Year 2025.”
UBS also highlights IBM's second-half 2025 weighted earnings profile and the risk of missing Q1 EPS, calling it an “unfavorable risk/reward in our view” with the stock trading at 21x consensus EPS in the next 12 months (NTM ).
Meanwhile, Pure Storage's loss of share in fast and soft demand for Everrgreen//One subscriptions represents a growth headwind for 2025, analysts said.
