Brian White: VMware Still Worth $71

On Wednesday, Drexel Hamilton issued a company note on VMware, Inc.

after the company delivered stronger than expected 4Q15 earnings performance but issued a lower 2016 outlook. Currently, analysts at Drexel Hamilton rate VMware as a Buy and lowered their price target from $73 to $71. Brian White, an analyst at Drexel Hamilton, wrote, "We believe VMware's valuation is extremely attractive on a standalone basis...VMware is the clear #1 player in the virtualization software market and the company is now expanding its reach in cloud-related technologies, software defined networking, software-defined storage and other areas." Analysts at Drexel Hamilton reported 2 reasons why they see strength in shares of VMware: 1. Profitability and cash flow generation In the fourth quarter VMware reported stronger than expected $1.26 EPS and $488 million in operating cash flow. Analysts believe that due to the company's strong customer relationships, operational efficiency, and market share, this trend of outperforming profitability and cash flow estimates could continue, particularly as the company has reported an acceleration in net bookings. 2. New growth areas Analysts wrote that VMware expects new growth areas including vCloud Air and AirWatch to outpace the decline in legacy computer products in 2016. With the growing importance of cloud computing, Drexel Hamilton likes VMware's mobile cloud platform and believes that they can increase the capabilities of that business segment in the future. Currently, VMware is trading at $45.00, up 1.26 percent.