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VMware, Inc. Message Board

  • marklien7 marklien7 Jan 29, 2013 4:26 PM Flag

    Looks like slow methodical institutional selling...

    can't be over with. Evaluations still too high (forward P/E= ~26) considering new growth estimates (10-15% max).

    Sentiment: Sell

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    • Check your numbers. The forward P/E is now ~20, and even using the growth estimates of 10-15% that are being offered, you have to look at the history of the company. They have always given conservative guidance and beat estimates. Also the financial community is distorting the job cut issue. Yes, they are cutting 900 jobs, but they also anticipate 1900 new hires, for net growth of 1000 employees. They are cutting jobs in underperforming divisions, while continuing to expand in growth areas. That is called "good management." Lastly, this stock is now trading where it was
      2 1/2 years ago, even though VMW has basically quadrupled earnings, more than doubled cash flow and the value of tangible assets.

      This quarter, they beat on both the top line (REVS) and bottom line (NET PROFIT). Either market manipulators are behind this, or management did a bad job selling their story. In either case, after this selling pressure lets up, VMW should move back up towards where it was, if not higher.

      I might not rush to buy, but I wouldn't wait too long either.

      Sentiment: Buy

      • 1 Reply to rexobxip
      • A forward P/E of 20 would give earnings of $3.9/share. They are estimated to make $3.25/sh and $3.75/sh in 2013 and 2014, respectively. What year are you looking at?
        This year, 2012, they earned $2.85/sh.
        The current P/E is 27.
        If they meet 2013 estimates, that is 14% earnings growth.
        Given the current CC, there is no way they are going to meet $3.25/sh. Competitors are just going to eat more market share. I estimate $3/sh.
        With a premium forward P/E of 20 (this is being very generous), that's a share price of $60.
        This stock has to correct. It's not the same company and industry it once was. This is the cycle of every product.

        Sentiment: Sell

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