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Bear Of The Day: VMware (VMW)

Brian Bolan

VMware (VMW) recently beat earings estimates but the stock tumbled and the Zacks Rank has fallen to the lowest level.  Let's take a look at why that is the case and if this stock is worth grabbing at these lower level in this Bear of the Day article.

Description

Headquartered in Palo Alto, CA, VMware Inc. is a leading provider of virtualization solutions. Its product portfolio addresses the needs of clients, both individuals and organizations. The company specializes in providing virtualization platforms, virtual infrastructure automation and virtual infrastructure management.

VMware's suite of virtualization solutions addresses a range of complex IT problems, including infrastructure optimization, business continuity, software lifecycle management and desktop management.

Recent Earnings

I see the company posted a beat recently -- and it was a beat a raise, yet the stock slid.

I see a 7 cent beat which translates into a 4.9% positive earnings surprise.  This was the fourth beat in a row, and they are all around the same size.  To me that is a positive.

Estimates

This is where the Zacks Rank really pays off.  I see estimates for this quarter and next quarter coming in a bit.  A 3 cent drop in this quarter and a 7 cent drop next quarter.

This year has a slight increase, but that was due to the beat.  Next year, however, saw a drop from $7.31 to $6.99.

That is a big move lower, but the company is still on very solid ground.

Valuation

22x forward earnings is not that expensive especially when you have 11% topline growth.  11x price to book is pretty high, and so is the 6x price to sales, but keep in mind this is a tech stock that keeps growing.

At the end of the day, the move lower in price does look like a buyable dip to me, but you need the market to continue to remain firm for this investment to work out.

Chart

 

VMware, Inc. Price and Consensus

VMware, Inc. Price and Consensus

VMware, Inc. price-consensus-chart | VMware, Inc. Quote

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