VMware, Inc.

VMW Details

VMware, Inc. (NYSE: VMW) pioneered the development and implementation of virtualization technologies with x86 server-based computing, decoupling application software from the underlying hardware. As a result, VMW's software provides a versatile digital basis for customers embarking on digital transformations. Revenue is generated through License, Subscription, SaaS services, software maintenance and professional services. As of November 16, 2021, the company's market capitalization stood at USD 52.32 billion.

Latest News:

• Extended Partnership: Vodafone, a British multinational telecommunications company, announced on November 11, 2021, that it would extend its partnership with VMW to deploy its Telco Cloud Platform in all European markets.
• Spin-off from DELL: VMW announced the completion of its spin-offs from Dell Technologies, an American global technology corporation, on November 01, 2021. This would provide VMW greater flexibility in executing its multi-cloud strategy, a streamlined capital structure and governance approach, and additional operational and financial flexibility. The spin-off terms included a special cash dividend of USD 27.40 per share on November 01, 2021 (Payment Date) to all VMW's shareholders as of the close of business on October 29, 2021 (Record Date). The first trading day after the Payment Date, November 2, 2021, will be the ex-dividend date.

H1FY22 Results:

• Progress in Total Revenues: VMW reported a slight increase of 9.32% in total revenues to USD 6.13 billion during H1FY22 (ended July 30, 2021) compared to USD 5.61 billion during H1FY21 (ended July 31, 2020), owing to an increase in revenues across all segments.
• Improvement in Net Income: VMW recorded a slight improvement in net income to USD 836 million during H1FY22 vs. USD 833 million during H1FY21.
• Strong Balance Sheet: As of July 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 5.94 billion and total debt (including Notes Payable to Dell and Capital obligations) of USD 5.04 billion.

Key Risks:

• Reliance on Third-Party Providers: Third-party suppliers provide data center space, equipment maintenance, and other colocation services for the company's subscription and SaaS solutions. Suppose these third-party suppliers fail to meet their promises. In that case, the company's image may suffer, causing consumers to lose trust, and its ability to sustain and develop its subscription and SaaS products may be jeopardized.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VMW Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

VMW's stock price has risen by only 5.34% in the past twelve months and is currently leaning towards the mid-band of its 52-week range of USD 107.05 to USD 141.09. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is at 47.23. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 154.15.

Considering the slight movement in the stock price in the past twelve months, market dominance, strategic spin-off, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 124.94, up 0.22% as of November 16, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.  

Disclaimer

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