UBS Reiterates Buy and $83 Price Target on VMware (VMW)
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UBS reiterated a Buy rating and $83.00 price target on VMware (NYSE: VMW) after spending time on the road with management.
Analyst Brent Thill "VMW is seeing an influx of positive catalysts that could help drive the stock higher - accelerating '16 billings growth, a building base of new products (NSX, vSAN, EUC) offsetting the legacy product slowdown, Dell/EMC acquisition now in the rear view mirror, cash flow could grow 40% in FY16E, and a $1.2Bn buyback with >$8.5Bn in cash + $2Bn in annual cash flow. This is a major contrast to the significant headwinds VMW has faced over the past year - material slowdown in overall license revenue and billings ('15 license rev. slowed to 5% from 14%, '15 billings slowed to 2% from 16%), a complete U-turn in their public cloud strategy (from build to partner), and the overhang of Dell/EMC and associated tracking stock which drove the stock down >50% from its $90+ high. We believe these headwinds are slowly turning into tailwinds and that ultimately VMW can have a secure position in the hybrid cloud, where the majority of larger enterprises will place their IT assets."
Shares of VMware closed at $74.34 yesterday.
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