Market Overview

Even After A Yearlong Run, KeyBanc Says VMware Is Attractively Valued

Share:
Even After A Yearlong Run, KeyBanc Says VMware Is Attractively Valued

After strong performance throughout 2017, VMware, Inc. (NYSE: VMW) remains well-positioned to continue benefiting from favorable industry trends, which bodes well for the stock's prospects in 2018, according to KeyBanc Capital Markets.

The Analyst

KeyBanc Capital Markets' Alex Kurtz upgraded VMware's stock rating from Sector Weight to Overweight and set a $142 price target.

The Thesis

VMware's business showed signs of strength throughout 2017 despite a rise in demand for containers and public cloud adoption as longer-term alternative platforms, Kurtz said in a note. (See Kurtz' track record here.) 

Specifically, the company showed strong renewal rates, especially with its largest enterprise licensing agreements, the analyst said. 

While the company's prospects for the coming year remain strong, the stock's price may not fully reflect that, according to KeyBanc. 

Shares of VMware are trading near the midpoint of its historical EV/NTM FCF ranges, Kurtz said. A "bull case" scenario price target of $172 implies blended revenue growth of 12 percent in fiscal 2019, with a 36-percent free cash flow margin and a 20x multiple, he said.

By comparison, company peer Red Hat Inc (NYSE: RHT) has a 27.5-percent free cash flow margin and 15.4-percent revenue growth outlook, Kurtz said. 

Price Action

Shares of VMware were trading higher by nearly 2 percent ahead of Monday's market open and are higher by nearly 60 percent since the start of 2017.

Related Links:

BMO Capital Upgrades VMware 'At Long Last,' Says Shares Can Move Higher

Why VMware Shares Are A Buy

Latest Ratings for VMW

DateFirmActionFromTo
Nov 2020UBSMaintainsNeutral
Nov 2020Morgan StanleyMaintainsEqual-Weight
Oct 2020KeyBancMaintainsOverweight

View More Analyst Ratings for VMW
View the Latest Analyst Ratings

 

Related Articles (VMW)

View Comments and Join the Discussion!

Posted-In: Alex Kurtz cloud computing Ela KeyBanc Capital Markets NSX vSANAnalyst Color Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
KALUBenchmarkUpgrades
YEXTDA DavidsonMaintains20.5
BYDB of A SecuritiesMaintains47.0
SAICMorgan StanleyMaintains98.0
PVHMorgan StanleyMaintains104.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com