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VMW

VMware NYSE:VMW Stock Report

Last Price

US$109.60

Market Cap

US$46.4b

7D

-2.5%

1Y

-24.7%

Updated

24 Sep, 2022

Data

Company Financials +
VMW fundamental analysis
Snowflake Score
Valuation6/6
Future Growth4/6
Past Performance1/6
Financial Health2/6
Dividends0/6

VMW Stock Overview

VMware, Inc. provides software solutions in the areas of modern applications, cloud management and infrastructure, networking, security, and digital workspaces in the United States and internationally.

VMware, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for VMware
Historical stock prices
Current Share PriceUS$109.60
52 Week HighUS$167.83
52 Week LowUS$91.53
Beta0.80
1 Month Change-9.94%
3 Month Change-7.09%
1 Year Change-24.71%
3 Year Change-24.87%
5 Year Change0.37%
Change since IPO114.90%

Recent News & Updates

Sep 12

Favorable Odds On Broadcom's Acquisition Of VMware

Summary VMware has not been thriving as a standalone firm. Investors are betting on the acquisition by Broadcom. The Wall Street consensus outlook indicates confidence that the deal will go through. The market-implied outlook (calculated from options prices) suggests elevated probabilities that the acquisition will proceed. In May, Broadcom (AVGO) announced that it was buying VMware (VMW) for $61 Billion in cash and stock, one of the largest tech acquisitions ever. As a result, VMware is currently living in the odd wait-and-see state of a company that is in the process of being acquired. The single most significant factor that investors are betting on is whether the acquisition will be completed. VMW is also hard to value because the company has failed to demonstrate earnings growth in recent years. As a result, the stock price has been unusually range bound. Broadcom believes that there are growth synergies from the acquisition that can make WMW's substantial portfolio of products, services, and intellectual property pay off. As the announcement states "With the combined company's shared focus on technology innovation and significant research and development expenditures, Broadcom will deliver compelling benefits for customers and partners." After an initial pop following the acquisition announcement in May, with the shares closing as high as $131.99, they have fallen to the current price of $118.12. The major potential blocker for the acquisition is regulatory. The current focus is on EU antitrust concerns, although there are also potential issues in the U.S. Seeking Alpha 5-Year price history and basic statistics for VMW (Source: Seeking Alpha) Under the terms of the proposed acquisition, announced on May 22nd, VMW shareholders will elect to receive either $142.50 per share or 0.252 shares of Broadcom for each share of VMW. At AVGO's current share price of $522.40, the current market value of the share exchange would be $131.64. Broadcom has committed to closing the deal by the end FY 2023, which is the end of October of 2023, about 13 ½ months from now. VMW's current share price is 17% below the cash offer, reflecting the market's handicapping on the probability of the deal not going through. ETrade Historical (4 years) and estimated future quarterly EPS for VMW. Green (red) values are amounts by which EPS beat (missed) the consensus expected value (Source: ETrade) VMW reported FY Q2 results on August 25, 2022, beating expectations on earnings and revenue. While the company delivered significant growth in Software-as-a-Service (SaaS) and subscription revenue, key areas for cloud computing companies, the Q2 EPS is very close to results for the same quarter in 2019 and slightly below the values for 2020 and 2021. Similarly in other quarters of the year, there is no earnings growth. This goes a long way towards explaining why the current share price is 29% below the all-time high closing price of $167.04 on May 16, 2019. To formulate an outlook on VMW, I am relying on two forms of consensus outlooks. The first is the well-known Wall Street analyst consensus. The second is a probabilistic outlook that is implied by options prices, showing the effective consensus view from the options market. This is called the market-implied outlook. The price of an option on a stock reflects the market's consensus estimate of the probability that the stock price will rise above (call option) or fall below (put option) a specific level (the option strike price) between now and when the option expires. By analyzing the prices of call and put options at a range of strike prices, all with the same expiration date, it is possible to calculate a probabilistic price forecast that reconciles the options prices. This is the market-implied outlook. For a deeper explanation and background, I recommend this monograph published by the CFA Institute. Readers may also be interested in my recent posts on AVGO (here and here), in which I use the same approach. Wall Street Consensus Outlook for VMW ETrade calculates the Wall Street consensus outlook for VMW by combining the views of 5 ranked analysts who have published ratings and price targets within the past 3 months. The consensus rating has recently changed from a hold to a buy. The consensus 12-month price target is $138.33, 17.5% above the current share price. This price target is a mere 3% below the proposed acquisition price. The range of price targets is very small, ranging from a low of $136 to a high of $142.50. This situation highlights one of the limitations of point forecasts (forecasts that specify a single value). The analysts are undoubtedly aware that there is a meaningful probability that the acquisition will not close, but given the option to predict just one outcome, betting on the deal being completed makes sense. ETrade Wall Street analyst consensus rating and 12-month price target for VMW (Source: ETrade) Seeking Alpha's version of the Wall Street consensus outlook is calculated using ratings and price targets published by 21 analysts over the past 90 days. The results are very similar, although the consensus rating on VWM has been a buy for all of the past year. The consensus price target is $138.16, 17% above the current share price, and there is little spread in the individual price targets, although the lowest is $120, just above where the shares currently trade. Seeking Alpha Wall Street analyst consensus rating and 12-month price target for VMW (Source: Seeking Alpha) The level of confidence in this acquisition closing, as reflected in the consistency among analyst price targets, can be appreciated by looking at two other companies that are also in this process. One is Elon Musk's contested acquisition of Twitter (TWTR), which I wrote about in mid-July. Mr. Musk is trying to back out of the deal so, unsurprisingly, there is far less certainty and the spread in the price targets is much higher. Microsoft's pending acquisition of Activision (ATVI) looks far more likely, and the spread in analyst price targets back in May (when I last analyzed ATVI) was very low, similar to the range currently seen for VMW. Back then ATVI was trading at $78.20 and the highest and lowest 12-month price targets from ETrade were $95 and $100, so the spread was 6.4% of the share price at that time ($5 / $78.20). For VMW, this spread is 4.7% of the current share price ($6.50 / $138.33). Market-Implied Outlook for VMW I have calculated the market-implied outlook for VMW for the next 4.3 months, using the prices of call and put options that expire on January 20, 2023. I would have preferred to also look at options expiring further into the future, but the open interest and trading levels of the longer-dated options is too low to make market-implied outlook meaningful. The standard presentation of the market-implied outlook is a probability distribution of price return, with probability on the vertical axis and return on the horizontal. Geoff Considine Market-implied price return probabilities for VMW for the 4.3-month period from now until January 20, 2023 (Source: Author's calculations using options quotes from ETrade) The market-implied outlook for the next 4.3 months is bi-modal, indicating that there are high probabilities of either a significant gain or a significant loss and that the probability of ending up in the middle of these is lower. This form of the market-implied outlook is consistent with other cases of pending acquisitions that I have analyzed (see this analysis for Twitter and this one for Activision-Blizzard). I have never gotten this kind of bi-modal market-implied outlook other than for stocks of companies being acquired. I interpret this outlook as indicating that the positive mode (with a peak in probability corresponding to an 11% gain over the next 4.3 months) represents the deal continuing to work its way forward, and the negative mode (with peak probability corresponding to -11% return) represents a drop in share price if the deal is blocked. Based on this outlook, there is a higher probability of the acquisition continuing to move forward (the probability is higher for the positive mode). The options prices show that there is substantial risk of the deal falling apart, however. The expected volatility calculated from this outlook is 37.4% (annualized).

Sep 01

VMware's vSphere 8 Brings DPUs From AMD, Intel, And Nvidia To Life

Summary Data Processing Units (DPUs) are starting to make an impact in corporate and cloud datacenters because of their ability to offload certain infrastructure tasks from a server’s main CPU. With the launch of VMware's vSphere 8 with support for Project Monterey, officially known as the vSphere Distributed Services Engine, the awareness and impact of DPUs is bound to get much larger. Aside from the vSphere news, VMware also made several announcements around its end-user computer offerings at VMware Explore. Those who follow the semiconductor market likely know that chipmakers AMD, Intel (INTC), and Nvidia (NVDA) all compete in various markets, most notably GPUs or graphics processing units. What few may realize, however, is that all three of these companies are also now competing in a market for a relatively new class of chip called a DPU, or Data Processing Unit. Sometimes also referred to as a Smart NIC (Network Interface Card), DPUs are starting to make an impact in corporate and cloud datacenters because of their ability to offload certain infrastructure tasks from a server’s main CPU. Thanks to the official launch of VMware’s (VMW) vSphere 8 with support for Project Monterey, officially known as the vSphere Distributed Services Engine, the awareness and impact of DPUs is bound to get much larger. The reason? With vSphere 8, the latest version of VMware’s cloud computing virtualization platform, the company is officially bringing support for new server architectures using DPUs from AMD and Nvidia. In addition, new server systems incorporating those DPUs are being introduced by Dell (DELL) and Hewlett Packard Enterprise (HPE). Support for Intel-based DPUs and server systems from Lenovo (LNVGY) will follow in subsequent releases. Intel has been developing its DPU technology for several years, but both AMD and Nvidia acquired other chip companies to bring DPUs into their portfolios. Nvidia purchased Mellanox Technologies in 2020, and AMD purchased Pensando Systems earlier this year. Early on, in talking about the purchase of Mellanox’s Bluefield DPU technology, Nvidia emphasized the growing importance of what they called “east-west” traffic in a datacenter. This basically referred to the network traffic that went from one server rack to another nearby rack as the result of the growing use of cloud-native, containerized applications that used these types of connections. Thanks to vSphere 8’s support for Distributed Services Engine, we’re seeing an even more compelling application of DPUs from all the vendors. These new applications leverage the onboard compute and storage capabilities that DPU server expansion boards also include. Specifically, DPUs are SOCs (system on chip) that include an Arm-based CPU core and a dedicated accelerator that’s designed to handle the infrastructure requirements (such as connecting to storage, performing networking, security tasks, etc.) that modern container-based applications require. vSphere Distributed Engine offloads these infrastructure services from the server CPU to the DPU, freeing the CPU up to work on the actual application workload. The result is better consolidation of workloads, more efficient performance on these core workloads, as well as separation of application workloads from those solely focused on infrastructure tasks, such as distributed firewalls, network traffic routing, and other storage and network-focused efforts. vSphere Distributed Services Engine manages the lifecycle of the DPU, including updating the software that runs in the DPU. Down the road, a potential added benefit of this arrangement is that DPUs would also be able to connect with bare metal servers that run their own dedicated OS and application workload, thus allowing them to connect to the larger VMware hybrid cloud infrastructure. The end result would be that any combination of virtualized, containerized, or bare metal workloads would all be capable of being managed from a single location via VMware’s Tanzu portfolio of modern application development and management tools. Aside from the vSphere news, VMware also made several announcements around its end-user computer offerings at VMware Explore. In particular, the company focused on enabling more effective hybrid work scenarios, via the concept of Workspaces, that integrate easy access to all corporate applications and key data across a range of different devices. At this year’s event, the company put a strong focus on automation of the Workspaces and on leveraging technologies like AI to help predict and prevent potential problems. The company also continued to refine its Horizon desktop-as-a-service cloud client computing solution with new enhancements in root cause analysis tools for Help Desk personnel. VMware previewed an automation tool for mobile devices, called Freestyle Orchestrator, that is designed to ease the process of provisioning mobile devices for use in corporate environments.

Shareholder Returns

VMWUS SoftwareUS Market
7D-2.5%-4.4%-5.2%
1Y-24.7%-35.3%-23.0%

Return vs Industry: VMW exceeded the US Software industry which returned -35.3% over the past year.

Return vs Market: VMW underperformed the US Market which returned -23.1% over the past year.

Price Volatility

Is VMW's price volatile compared to industry and market?
VMW volatility
VMW Average Weekly Movement2.8%
Software Industry Average Movement9.0%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

Stable Share Price: VMW is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: VMW's weekly volatility (3%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
199837,500Raghu Raghuramhttps://www.vmware.com

VMware, Inc. provides software solutions in the areas of modern applications, cloud management and infrastructure, networking, security, and digital workspaces in the United States and internationally. It offers VMware multi-cloud solutions, including VMware vSphere, a data center infrastructure that provides the fundamental compute layer; vSAN and VxRail, which offers holistic data storage and protection options to applications running on vSphere; and vRealize Cloud Management solutions that manages hybrid and multi-cloud environments running in virtual machines and containers, as well as VMware Cloud Foundation, a cloud platform that combines its vSphere, vSAN, and NSX with vRealize Cloud Management into an integrated stack and delivers enterprise-ready cloud infrastructure for private and public clouds. The company also provides networking solutions, such as VMware NSX, NSX Distributed and Gateway Firewalls, NSX Network Detection and Response Engine, NSX Advanced Load Balancer, Tanzu Service Mesh, and VMware SASE; security solutions consisting of VMware Carbon Black Endpoint, Workload, and Container; and digital workspace solutions comprising Workspace ONE Unified Endpoint Management, Access, Intelligent Hub, and Horizon.

VMware, Inc. Fundamentals Summary

How do VMware's earnings and revenue compare to its market cap?
VMW fundamental statistics
Market CapUS$46.36b
Earnings (TTM)US$1.57b
Revenue (TTM)US$13.14b

29.5x

P/E Ratio

3.5x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
VMW income statement (TTM)
RevenueUS$13.14b
Cost of RevenueUS$2.39b
Gross ProfitUS$10.76b
Other ExpensesUS$9.19b
EarningsUS$1.57b

Last Reported Earnings

Jul 29, 2022

Next Earnings Date

Nov 22, 2022

Earnings per share (EPS)3.72
Gross Margin81.85%
Net Profit Margin11.97%
Debt/Equity Ratio7,986.4%

How did VMW perform over the long term?

See historical performance and comparison