The Dell-EMC Deal Still An Overhang For VMware
- 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.”
“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.
Latest Ratings for VMW
|Jan 2017||Wells Fargo||Initiates Coverage On||Market Perform|
|Nov 2016||Bank of America||Downgrades||Buy||Neutral|
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