Does VMware’s Stock Have Moderate Upside With Earnings Nearby?

VMW: VMware logo

VMware’s stock (NYSE: VMW) is scheduled to report its fiscal Q2 2022 (ended July 2021) results on Thursday, August 26. We expect VMW to beat the consensus estimates for revenues and earnings. The company has reported better than expected revenue and earnings figures in each of the last four quarters. VMW’s revenue growth continued in Q1 of FY 2022 led by its Subscription and SaaS segment which saw revenue grow by 29% y-o-y. We expect the same to drive the second-quarter FY2022 results, as well.

Our forecast indicates that VMware’s valuation is $174 per share, which is 14% above the current market price of $153. Look at our interactive dashboard analysis on VMware’s pre-earnings: What To Expect in Q2? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q2

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Trefis estimates VMW’s fiscal Q2 2022 (ended July 2021) revenues to be around $3.2 billion, above the $3.1 billion consensus estimate. In Q1 2022, VMW’s revenue was $2.99 billion, up 9% y-o-y. The company’s revenue has grown consistently across the last few quarters. Overall, we expect revenue of around $12.7 billion in FY2022. Our dashboard on VMware’s revenues offers more details on the company’s segments.

(2) EPS likely to beat the consensus estimates

VMW’s Q2 2022 (ended July 2021) earnings per share (EPS) is expected to be $1.45 per Trefis analysis, slightly above the consensus estimate of $1.40. In FY 2022, we expect the company to see slight fall in net income margin to 16.7% but overall EPS to improve to $5.03 in FY2022.

(3) Stock price estimate 14% above the current market price

Going by our VMware’s valuation, with an EPS estimate of $5.03 and a P/E multiple of 34.7x in fiscal 2022, translates into a price of $174, which is 14% above the current market price of $153.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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