Brian White Is Buying VMware After 'Perfect Storm'

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  • VMware, Inc. VMW shares are down 28 percent year-to-date, even after hitting a high of $91.14 on August 3.
  • Drexel Hamilton’s Brian White upgraded the rating on the company from Hold to Buy, while maintaining the price target at $73.
  • The company’s shares have plunged following news of Dell’s planned acquisition of EMC Corporation EMC, the issuance of VMware tracking stock and mixed 3Q15 results, White mentioned.

Following the 23 percent decline in VMware’s shares since October 9, the valuation now appears to be “extremely compelling” and more than reflecting the company’s portfolio transition, analyst Brian White said.

“VMware’s stock has been hit with the perfect storm that includes Dell’s planned acquisition of EMC and the issuance of VMware tracking stock (with no voting rights), combined with VMware’s announcement of a dilutive Cloud Services joint venture with EMC (that includes Virtustream) last week and a mixed 3Q:15 earnings report,” White wrote.

The plummeting of VMware’s shares could threaten Dell’s proposed acquisition of EMC, requiring Dell to make changes in the terms of the transaction. The analyst expects the Dell deal to generate more than $1 billion in incremental revenue opportunities for VMware over the next few years, making the deal fundamentally positive for the company.

On the other hand, another bidder could emerge for EMC with more favorable terms, White added.

In the report Drexel Hamilton noted, “As software becomes more ubiquitous in the data center, VMware has been actively expanding outside its traditional server virtualization software business into new areas of growth that we believe could prove interesting in the future.”

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Posted In: Analyst ColorLong IdeasUpgradesAnalyst RatingsMoversTrading IdeasBrian WhiteDrexel Hamilton
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