Solid Vital Signs and Strong Outlook for the King of Virtualization
Q2 should prove to be a sea change for the pervasive negative sentiment and we
expect the stock to re-rate. Core to the Bear thesis was that VMW couldn’t meet
implied license growth in 2H but the healthy undercurrents of Q2 (record big deals,
strong ELAs, positive vSphere unit and ASP trends and double digit growth for
products ex-vSphere) bode well for 2H and VMW raised top-end of guidance. We
reiterate our Buy on VMW as a rare multi-year accelerating growth story as a core
enabler of cloud computing trading for only 1.1x its projected 3yr EPS CAGR.