VMware’s stock (NYSE: VMW) has declined by 1.3% over the last five trading days to $161 before its earnings release on Thursday May 27. In comparison VMware valuation as per Trefis is $172. The broader S&P500 was nearly flat over the last five trading days. VMware’s stock witnessed a rise in the last couple of weeks after the release of preliminary Q1 FY 2022 (ended April 2021) on May 12. In the preliminary results the company expects revenue to be $2.99 billion, up 9.5% y-o-y while earnings are expected to be $1.01 per share compared to $0.92 in the same period of the previous quarter. Will the company resume its upward trajectory over the coming weeks, or is a further fall in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price using multiple years of historical stock data, returns for VMware’s stock average around 1.6% in the next one-month (twenty-one trading days) period after experiencing a 1.3% fall in a week (five trading days). Further, the stock is likely to underperform S&P500 returns by 0.2% over the next month (twenty-one trading days).
But how would these numbers change if you are interested in holding VMware’s stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test VMware’s stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!
MACHINE LEARNING ENGINE – try it yourself:
IF VMW stock moved by -5% over five trading days, THEN over the next twenty-one trading days, VMW stock moves an average of 3.3%, which implies an excess return of 1.0% compared to the S&P500.
More importantly, there is a 62.8% probability of a positive return over the next twenty-one trading days and a 54.1% probability of a positive excess return after a -5% change over five trading days.
Some Fun Scenarios, FAQs & Making Sense of VMware Stock Movements
Question 1: Is the average return for VMware Inc’s stock higher after a drop?
Case 1: VMware Inc stock drops by -5% or more in a week
Case 2: VMware Inc stock rises by 5% or more in a week
Is the average return for VMware Inc stock higher over the subsequent month after Case 1 or Case 2?
VMW stock fares better after Case 1, with an average return of 3.3% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 0.3% for Case 2.
In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.
Try the Trefis machine learning engine above to see for yourself how VMware Inc’s stock is likely to behave after any specific gain or loss over a period.
Question 2: Does patience pay?
If you buy and hold VMware Inc stock, the expectation is over time the near term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.
Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!
For VMW stock, the returns over the next N days after a -5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
You can try the engine to see what this table looks like for VMware Inc after a larger loss over the last week, month, or quarter.
Question 3: What about the average return after a rise if you wait for a while?
The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.
VMW’s returns over the next N days after a 5% change over the last 5 trading days is detailed in the table below, along with the returns for the S&P500:
It’s pretty powerful to test the trend for yourself for VMware Inc stock by changing the inputs in the charts above.
While VMware stock may have moved, it is helpful to see how its peers stack up. Check out Microsoft Peer Comparisons to see how Microsoft compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.