Wall Street Aflutter After VMware's (VMW) Analyst Day

August 27, 2013 8:01 AM EDT Send to a Friend
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VMware (NYSE: VMW) held a well attended user event and analyst day Monday and analysts are out gushing about the company this morning.

  • Needham & Company's Scott Zeller reiterated a Buy rating and raised his price target from $90 to $100. "The VMW user group and analyst day was well attended by both investors and customers. CEO Pat Gelsinger and CFO Chadwick have both been in place for roughly 1 year, and their comments were buoyed by confidence from JuneQ results being surprisingly strong; at analyst day, management reaffirmed previous CY13 guidance. Our main takeaways are (a) CY13 has been a restructuring year, complete with divestitures, as well as investments; (b) growth hopes are pinned on emerging areas, although some are not yet generating material revenue; and (c) the core franchise (ELAs) is gaining strength from purchases of "suites", which is a positive indicator."

  • Oppenheimer's Shaul Eyal reiterated an Outperform rating and raised his price target from $90 to $95. "Our key takeaways from VMW's analyst day are: 1) Last year's announced alignment is complete, enabling VMS to focus on growth opportunities in the coming years. 2) These growth opportunities include SDDC, Hybrid Cloud Services and End-user Computing. 3) Near term, FY13 guidance was reaffirmed, suggesting positive trends remain intact. We believe that VMW remains well positioned to benefit from the groundwork it has laid over the past year as clients move from server virtualization to the software-defined data center."

  • Goldman Sach's Heather Bellini maintains a Buy rating and $105 price target. "VMW continues to believe there is ample runway within core server virtualization, since even as 67% of workloads are expected to have been virtualized in CY13, VMW will continue to drive toward 100% virtualization over time. For mission critical applications, VMW noted that as of June 2013 penetration levels are highest for Microsoft versus Oracle and SAP. Importantly, on premise workloads (approximately 80mn today) continue to grow in the mid to high teens while public cloud workloads (5-6mn today) are growing significantly faster at 50%+. Accordingly, if VMW can grow its server virtualization business at least in-line with enterprise workload growth and also achieve an ASP uplift from suites, it would suggest billings growth in the high-teens to low 20% range (GSe: 15% yoy billings growth in CY13, 20% excluding GoPivotal, etc.). "

  • Jefferies Ross MacMillan reiterated a Buy rating and $105 price target. "We attended VMware’s Financial Analyst Day held in conjunction with its VMworld event yesterday and came away with continued confidence toward the potential for a sustainable revenue growth re-acceleration which was the primary basis for our Aug. 23 upgrade."

  • BMO Capital's Keith Bachman reiterated a Market Perform rating and $87 price target. "We think the most important comment is that we think attendance at VMW’s 10th annual customer event was up a meaningful amount from last year, according to one company representative. Bottom line, we think the conclusion is that customers are still very interested in VMW’s products and services. Consistent with the Strategic Forum in March, VMW anticipates 15%-20% revenue growth and 50 bp of operating margin expansion in 2014-2016. For 2015, if we assume 15% revenue growth and 50 bp of operating margin expansion, then our EPS estimate would be ~$4.50 vs. consensus of $4.17."

  • Deutsche Bank's Nandan Amladi maintained a Hold rating and $80 price target. "We believe that VMW's installed base of approx 40m VM's across 500,000 customers provide a significant up-sell opportunity, but we are also cognizant of the competitive and pricing pressures it faces. SDDC's vision is compelling, but we do not expect it to be a near term growth driver."

  • Wells Fargo Jason Maynard maintains an Outperform rating and $90-$95 valuation range. "We thought the keynote and analyst meeting affirmed our thesis of a cyclical rebound and also highlighted the challenges in executing on the longer term growth plays. We remain positive on the stock as we think VMware can grow faster in FY2013/14 than the market thinks. However, we believe the growth story gets more difficult in 2015 as some of the secular headwinds become more pronounced. The company reiterated its financial guidance for Q3 and FY2013 and focused its presentations on its three pillars of growth: SDDC, hybrid cloud and end user computing. The company also unofficially initiated FY2014 revenue guidance of +15%, slightly ahead of the Street consensus. Our 3 main takeaways were 1) strong product and sales focus post the restructuring should help execution; 2) vCloud Hybrid Service is now GA and baby steps company into the public cloud, and 3) concerted effort to coolly embrace OpenStack while de-positioning it as not enterprise ready seems tricky to pull off. We think that the company should be able to continue to post mid-teens or better bookings/revenue growth because of better focus, an increase in productive sales reps, and a growing partner contribution."

  • FBR Capital analyst Daniel H. Ives maintained an Outperform rating and $115 price target. "Yesterday, we attended VMware's analyst day in San Francisco, which was incorporated into its annual VMworld user conference as usual. While the focus was largely on the company's next stage of growth with software-defined datacenter (SDDC), hybrid cloud, and end-user computing (EUC) offerings front and center, the company also reaffirmed guidance for 3Q and 2013. With that said, VMware appears poised to benefit from a massive growth opportunity (e.g., a $50 billion TAM by 2016 was reiterated from its Pivotal analyst event earlier this year) with its well-positioned product offerings in the IT-as-a-service space, given a clear ROI and strong secular tailwinds, in our view."

  • Nomura's Rick Sherlund reiterated a Buy rating and $95 price target. "VMware is currently holding the company’s VMworld 2013 conference, in San Francisco, CA. VMware management kicked off the company’s financial analyst meeting by reaffirming the company’s prior guidance (revenues of $1.27bn-$1.30bn for 3Q13 and $5.12bn-$5.24bn for FY13). Later in the meeting, management provided a glimpse of 2014 guidance, suggesting the company was looking for ~15% revenue growth in 2014. Several times, throughout the day, VMware highlighted the large market opportunity available to the company in the Software Defined Data Center, Hybrid Cloud and End User Computing markets, suggesting that the opportunity could be as large as $50bn by 2016. FY13E EPS at $3.31; FY14E EPS at $3.78."

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

    Shares of VMware closed at $86.52 yesterday.


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