VMware (VMW) hasn’t gone anywhere in a year — even though profit growth has averaged 32% a quarter during that time and the P/E is now only 27 — yet I wouldn’t be a buyer here, I’d wait for the stock to hit long-term support at $75.
One Year Chart
VMW has had an up-and-down year, even though profit growth (bottom left) has been solid the last four quarters. Estimates look good but only 14% profit growth is expected in 2013 because the company has “macro uncertainties” across the world and isn’t going out on a limb for 2013 guidance. Quarterly estimates and annual estimates just rose, so the company will probably beat the 14% figure. This company is a 20% to 25% grower (sales rose 20% last qtr). Still, with a P/E of 27 this stock is around where it should be. VMW has little upside.
When we look at the ten year chart, you can see the stock bottomed around $75 to $80 the past two years. $75 is the figure I would focus on, I think VMW offers good upside if you get in just above $75.
Fair Value
2013’sFair Value is $97. So if if you were to get in around $77 then your 2013 upside would be 25% (probably more since VMW usually beats/ups). This stock has peaked over $110 before.
Sharek’s Take
VMW is not a good buy right now. The numbers look good but not great. I would focus on the $75 long-term support line and see if you can get in slightly above that. That would be 23 times earnings, reasonable the VMW.
View the Earnings Table here.View the Ten Year Chart here.
