VMware: What Has Changed?

by Trefis Team
-12.22%
Downside
171
Market
150
Trefis
VMW
VMware
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Now that Dell is once again a publicly traded company, much of the uncertainty associated with VMware‘s (NYSE:VMW) stock seems to have subsided. Accordingly, despite likely relative weakness in the broader IT spending atmosphere, we have updated our price estimate for the company’s stock. We have revised our price estimate upward to $150 per share, which is slightly ahead of the current market price. Our interactive dashboard on VMware’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation.

 

On December 28, 2018, VMware announced a special $13 billion one-time dividend relating to the Dell tracking stock buyout deal. With the Dell deal out of the way, VMware’s operational performance can go back to being the primary focus for investors. VMware is a leader in the cloud computing and virtualization market with deep integrations with AWS and IBM cloud. The need for digital transformation, the move towards a multi-cloud setup and complexity in dealing with heterogeneous IT infrastructure environments is likely to help VMware sustain growth over the long term.

The largest likely headwind could be from expected weakness in IT spending. However, due to the increasingly non-discretionary nature of VMware’s core offerings, the company may continue to register decent growth. In addition, the association with Dell (with the uncertainties related to the tracking stock deal out of the way) could not only provide a boost to VMware’s revenues, but could also help VMware command a higher valuation multiple.

Do not agree with our forecast? Create your own price forecast for VMware by changing the base inputs (blue dots) on our interactive dashboard.

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