VMware (VMW): Raising PT After Non Deal Roadshow - Jefferies

Jefferies analyst, John DiFucci, reiterated his Buy rating on shares of VMware (NYSE: VMW) after taking management (CEO Pat Gelsinger, CFO Zane Rowe, Lead Independent Board Member Paul Sagan, and VP IR Paul Ziots) on a non deal roadshow.

VMW had about $8.7B of cash at the end of June, about $7B of which is international. 2016 guidance implies another $900M in FCF in 2H. In addition, it has a $1.5B note payable to EMC.

The $1B Rev synergy with Dell was contemplated in current guidance for this year, but it will take time to realize, with much of it coming next year.

Management noted that morale is now good and improving, with attrition rates falling from the peak, which were at market rates, but are now below market, though not yet back to where they were. Employee stock grants at the turn of the year were at a much lower share price than the current level, which helps a lot.

The analyst believes management’s guidance for meaningful cash flow growth this year is attainable and he is increasing his estimates for out years to modestly above the growth of the economy until it moderates to that level into perpetuity. The estimate increase causes the PT to rise to $89 from $84.

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 $73.08 yesterday.

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