What Is VMware’s Fundamental Value Based On Expected FY’19 Results?
VMware (NYSE:VMW) had a strong end to fiscal 2018, with strong revenue growth across segments. This was complemented by a slight improvement in gross margins. The virtualization and cloud computing provider continued to demonstrate strength in its core business through the fiscal year, with fast-growing segments such as network virtualization, hybrid cloud and vSAN driving growth. The company reported strong demand for new license bookings, which drove product revenues. Similarly, services revenues also grew at a similar pace through the first half of the fiscal year, which eventually slowed down to single digits in the latter half. This trend is likely to continue through the current fiscal year as well.
We have summarized our full year expectations for VMware, based on the company’s guidance and our own estimates, on our interactive dashboard platform. We have used our forecasts for full year results to arrive at our price estimate for VMware. You can change expected segment revenue, EBITDA margin and EV multiple figures for VMware to gauge how changes will impact its valuation.
VMware’s licenses segment is likely to continue to grow rapidly. We forecast license revenues to increase at around 10% to $3.5 billion, in line with the company’s guidance. Comparatively, services revenues are projected to be up by around 6% to just over $5 billion. While SG&A expenses could continue to decrease moderately, R&D expenses are expected to continue to see rapid growth. As a result, we forecast a flat adjusted EBITDA margin for FY’19 over the comparable prior year. Based on VMware’s expected FY 2019 results, we have a $103 price estimate for the company’s stock, which is around 10% lower than the current market price.
See Full Analysis For VMware Here
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own