Analysts Raise VMware Price Targets After Q3 Beat-And-Raise

VMware, Inc. VMW reported a beat-and-raise quarter, sending its shares sharply higher Friday morning.

The Analysts

Jefferies analyst John DiFucci maintained a Buy rating on VMware and raised the price target from $186 to $196.

Wedbush's Daniel Ives maintained an Outperform rating and hiked the price target from $185 to $200.

Raymond James analyst Michael Turits reiterated an Outperform rating and lifted the price target from $174 to $190.

Jefferies: Impressive Results, Across-The-Board Strength

VMware's better-than-expected fiscal 2019 third-quarter results reflected across-the-board strength in all product areas, DiFucci said in a note. 

The Q4 and 2019 guidance was above consensus expectations, he said. 

The results are impressive, DiFucci said. License billings outperformance vs. total billings is a positive leading indicator for future revenue, he said, meaning he attaches less significance to moderating billings growth.

Wedbush Sees Golden Opportunity Ahead

VMware's initial fiscal 2020 revenue guidance was roughly 400 basis points above the Street estimate, as the company sees an inflection point amid enterprises moving to the hybrid cloud on its core platform, Ives said in a note. 

" ... Looking head over the next 12 to 18 months, the company has a golden opportunity in our opinion to capitalize on its past cloud success and massive installed base through a slew of new offerings, ELA upgrades, flagship AWS partnership and the hybrid cloud secular shift." 

The analyst said he expects the stock to move higher as VMware heads into the year-end and fiscal 2020 with major tailwinds on both its existing core platform and new cloud products.

The quarter and the robust 2020 guidance were a major step in the right direction, according to Wedbush. 

Raymond James: Solid Beat-And-Raise, Impressive Guidance

Revenue, license and license billings all accelerated from Q2, but total billings growth eased slightly on a tougher comparison, Turits said in a note. 

Citing industry checks, the analyst said large multiyear deals may be contributing as well.

The company is extending its position in hybrid cloud, primarily in partnership with Amazon.com, Inc. AMZN' s AWS via VMware Cloud on AWS, Amazon RDS on VMware and via AWS' on-premise cloud stack in partnership with VMware and AWS Outposts, Turits said. 

Raymond James raised its 2019 revenue forecasts, and consequently the price target for the shares.

The Price Action

VMware shares have added about 29 percent in the year-to-date period.

At last check, the shares were trading 3.10 percent higher at $166.48.

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