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VMware (VMW) Stock is Not Worth What it Used to Be

When I updated my info on VMware (VMW) this quarter I noticed a couple changes to VMW’s fundamentals — with each change a negative one. This stock isn’t worth what it used to be.

One Year Chart

The first change is VMW only grew profits 24% last quarter. That’s down more than ten percent from the previous three quarters. So growth is slowing. Estimates also show teens growth ahead, and if the company beats the street by 2 cents this quarter (as it did last quarter and three quarters ago), then it will post 20% profit growth — still way below the 30% plus we were used to.

Also, profit estimates used to increase, but this quarter they have decreased a bit. That’s a second change in the fundamentals. Estimates only fell slightly (this is shown in the Earnings Table), but I was used to seeing a lot of green and now I am seeing red — especially in the bottom half of the table.

Fair Value

I am taking VMW’s Fair Value down from 40 times earnings to 30 times earnings. The stock is selling around where it should be.

Sharek’s Take

Right now, VMware isn’t worth buying. The outlook for next year also isn’t great, as the stock only has 4% upside to 2013’s Fair Value. I’m not going to watchVMW too close.

View the Earnings Table here.
View the Ten Year Chart here.

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