VMware Expects More Growth in 2021, Stock Is a Buy Amid Strong Outlook
In the last three months, VMware stock has fallen 13 percent. Is VMW stock a good buy at this price? How's the company's outlook and what can investors expect?
Jan. 14 2021, Published 10:05 a.m. ET
On Jan. 13, VMware stock fell by 6.8 percent, while the S&P 500 rose by 0.2 percent. The stock was down $9.71 from its previous closing price of $142.91 on a volume of 6,979,598 shares. In the last three months, the S&P 500 has risen by 9.2 percent, while VMware stock has lost 13 percent. Should investors buy or sell VMware or VMW stock at this price?
On Jan. 13, VMware stock fell significantly following reports that Intel CEO Bob Swan will be replaced by VMware CEO Pat Gelsinger. However, Gelsinger will still be on VMware's board. The company’s CFO, Zane Rowe, will act as interim CEO. Gelsinger’s departure could hinder Dell’s plans for the VMware spin-off. Dell owns an 81 percent controlling stake in VMware. Any transaction wouldn’t happen until September 2021 at the earliest for a tax-free deal.
VMware CEO Pat Gelsinger
VMware on Stocktwits
VMware stock has become a major talking point on social media platforms. An investor named ChartMill on Stocktwits said that VMware has solid EPS growth. Over the past five years, the company’s EPS has been growing by about 11.6 percent annually. Another investor by the name ancii thinks that VMware stock could reach $200 by the end of this year. The investor added that VMware will likely benefit if the Dell separation happens.
VMware doesn’t pay dividends
Currently, VMware doesn’t pay dividends.
VMware’s valuation
On Jan. 13, VMware stock fell by 6.8 percent and closed at $133.20. At that closing price, the market capitalization was $55.9 billion. VMware stock trades at a forward PE multiple of 20.12x.
VMware’s stock forecast
VMware stock has fallen by 7.5 percent in the last five days and by 12.5 percent in the last year. The stock is trading 18.4 percent below its 52-week high of $163.17 and 54.9 percent above its 52-week low of $86.
According to estimates compiled by CNN, analysts' median target price is $175 for VMware, which is 31.4 percent above its current stock price. Among the 28 analysts tracking VMware, 18 recommend a buy, ten recommend a hold, and none recommend a sell. The highest target price of $200 is 50.2 percent above the stock's current price, while the lowest target price of $145 is 8.9 percent above the stock's current price.
VMware stock is a buy
VMware stock is a buy based on the strong growth outlook. The company has the potential to generate higher profits, which it offers at a reasonable forward multiple. VMware’s intrinsic value for the stock is $172, but the stock is currently trading at $133.
VMware offers cloud computing and virtualization software and services. In the first nine months of 2020, the company’s sales grew by 9 percent year-over-year to $8.5 billion despite the coronavirus pandemic. VMware’s sales are expected to surge by 10 percent to $12 billion in 2021.