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The Dell-EMC Deal Still An Overhang For VMware

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The Dell-EMC Deal Still An Overhang For VMware
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  • Shares of VMware, Inc. (NYSE: VMW) have declined 43.29 percent over the last six months, reaching a low of $48.79 on January 25.
  • Daniel H. Ives of FBR & Co. has maintained a Market Perform rating on the company, while lowering the price target from $73 to $59.
  • Ives mentioned the announcement of the deal between Dell Inc. and EMC Corporation (NYSE: EMC) has been a “black cloud” over VMware’s stock.

Analyst Daniel Ives explained that VMware had declined about 40 percent since the announcement of the Dell-EMC deal, given investor fears regarding a “a tracking stock overhang and fundamental disruption from the deal.”

However, Ives also mentioned the robust December quarter results were “a small step in a positive direction,” with VMware beating the consensus forecasts across the board, driven by seasonally strong deal flow into the yearend.

According to the FBR report, “While guidance for 2016 from a headline perspective looks very soft, it is mostly Virtustream-related as this joint initiative was previously scratched and taken off VMware's books.”

Related Link: Report: VMWare To Oversee A Big Headcount Reduction

“Ultimately, while VMware has some headwinds ahead, we believe investors should breathe a sigh of relief after last night's quarter/guidance,” Ives stated.

 

The 1Q16 total revenue and EPS estimates have been reduced to reflect the loss of the Virtustream contribution, along with bookings timing and company-specific headwinds.

For FY16, the total revenue estimate has been lowered, while the EPS estimate has been raised to reflect a ramp in profitability and margins due to the model mix shift.

Image Credit: mage Credit: By Raysonho @ Open Grid Scheduler / Grid Engine (Own work) [CC0], via Wikimedia Commons

Latest Ratings for VMW

DateFirmActionFromTo
Jan 2017Wells FargoInitiates Coverage OnMarket Perform
Jan 2017UBSDowngradesBuyNeutral
Nov 2016Bank of AmericaDowngradesBuyNeutral

View More Analyst Ratings for VMW
View the Latest Analyst Ratings

Posted-In: Daniel H. Ives FBR & Co. VirtustreamAnalyst Color Long Ideas Price Target Analyst Ratings Trading Ideas Best of Benzinga

 

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