Stock Analysis & Ideas

VMware: Fundamentals, Valuation Look Attractive

Server virtualization software solutions developer VMware (VMW) looks well poised to cash in on the rampant cloud transformations that are happening across industries. Expanding clientele is a positive for the company. Notably, VMware’s strength in the cloud market is attracting key partnerships with the likes of Accenture (ACN), Amazon (AMZN) AWS, Google (GOOGL), and Oracle (ORCL).

Dell Technologies (DELL) completed its spin-off of VMware on November 1. VMware’s solid focus on being a standalone company after its separation from Dell is expected to be a key growth catalyst.

In its annual conference hosted last month, VMware mentioned that after breaking off with Dell, it has embarked on “Chapter 3” of its growth story on a positive note, and will focus on multi-cloud offerings over the next two decades. (See Analysts’ Top Stocks on TipRanks)

Expert Weighs In

Monness analyst Brian White looked into the fundamentals and developments of VMware, and he now expects the company to meet its revenue growth expectation for FY22, which stands at 9% year-over-year.

“VMware holds the potential to benefit from an improving global economy, capitalize on the multi-cloud trend, and improve its focus after the recent separation from Dell Technologies,” White noted.

He also believes the company’s current valuation is attractive after a tepid stock price performance this year, and this can be a great investment opportunity for value investors.

Despite the positive outlook for the company, White chose to tread cautiously, maintaining a Hold rating on VMware, with a price target of $125.54.

Wall Street’s Stance

Wall Street analyst consensus has a fairly optimistic stance towards VMware, with a Moderate Buy rating based on seven Buys and eight Holds. The average VMware price target of $161.14 indicates an upside potential of 28.4%.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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