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FBR Capital Downgrades EMC (EMC) to Market Perform

June 15, 2015 6:21 AM EDT
Get Alerts EMC Hot Sheet
Price: $26.05 --0%

Rating Summary:
    14 Buy, 25 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 13 | Down: 10 | New: 10
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FBR Capital downgraded EMC (NYSE: EMC) from Outperform to Market Perform with a price target of $28.00 (from $31.00).

Analyst Daniel Ives commented, "We are downgrading shares of EMC Corporation (EMC) from Outperform to Market Perform and lowering our price target from $31 to $28 (~13x our FY16 pro forma EPS estimate) in light of the company's weakening fundamentals, management's dogmatic view around VMware, and execution issues that lower our confidence in management’s ability to steer this company back to normalized growth and margins over the coming quarters. With EMC's "bread-and-butter" storage business experiencing inconsistent performance over the past couple of quarters, the expected benefits from EMC's all-important federation of offerings have left investors scratching their heads, in our view. While we believe potential activism could put a floor on EMC shares and ultimately enhance shareholder value over time (e.g., VMware spin-off, M&A path, etc.), we find it hard to remain positive on the EMC story, given our expectation for lackluster growth prospects in 2H15/ FY16. Overall, although we believe the recent acquisition of Virtustream was a smart strategic move, we prefer the sidelines, as choppy execution and a continuation of the status quo (e.g., no change around EMC's overall corporate structure) leave the potential for enhanced shareholder value up in the air, in our view. Although EMC's large buyback and strong focus on new product areas (AirWatch, NSX, Pivotal, ViPR, ScaleIO, etc.) could offer investors some respite in light of choppy results over the past year, we believe the company will need more M&A to help find its next growth act, as its core business remains very mature and may have inherent challenges ahead given the shift to the next-generation datacenter and the evolving role of storage capabilities/needs for enterprises going forward in a virtualized world."

For an analyst ratings summary and ratings history on EMC click here. For more ratings news on EMC click here.

Shares of EMC closed at $27.07 yesterday.



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