| Stock (Symbol) | Stock Price | |
VMware (VMW) |
$104 |
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| Data is as of | Expected to Report | Sector |
November 16, 2011 |
Jan 23 |
Technology |
| Sharek’s Take | ||
 VMware posted a solid quarter — above views — but the CEO thinks 2012 will be more challenging. The estimates show revenue and profit growth is set to slow, but I feel VMW will continue to beat estimates. VMW is fairly valued here at 41 times earnings. I’m not inclined to sell the stock even though the upside isn’t great because cloud computing is one of the fastest growing industries right now, and should continue to be for the next three-to-five years. |
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| One-Year Chart | ||
 I purchased VMW on September 23rd at $83. That was a shrewd move as the stock is $104 now. That’s a 25% gain. The bad news is VMW doesn’t seem to have the power to break out and head higher. Notice in the one-year chart that the previous high was $111. VMW’s P/E is 41 and with profit growth expected to slow to the teens in coming quarters, I doubt this stock will breakout. |
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| Earnings Table | ||
 Profit growth slowed from 62% to 36% last quarter. Investors didn’t mind but that took VMW out of hyper-growth. Revenue growth was 34% LastQtr, 37% 2QtrsAgo. One negative is profit growth wasn’t up sequentially, that breaks a string dating back more than two years. VMW beat by three cents and has beaten every quarter in the past year. I think that will continue because the CEO lowballed revenue estimates so much. Annual estimates continue to increase, but its not enough to push the stock higher. These are little moves. Quarterly estimates show profit growth is set to slow to the teens two quarters from now. I think VMW can come through with 20-25% growth, but witha 41 P/E that won’t move the stock up. |
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| Fair Value | ||
 This stock is selling at Fair Value. Upside isn’t even good through 2013. VMW will have to beat these estimates. |
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| Ten-Year Chart | ||
 VMW took a dive in late 2007/2008 with the stock market. The company had negative profit growth in 2009, so we must be cautious of this stock during a poor economy.I like the base VMW is building right now. Solid. Just not enough juice to breakout. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
14 of 20 |
VMware is a must-own for me. Cloud is in a cycle that should last 3-5 more years. So even though the stock’s selling around its Fair Value, I need to hold it for the long-term. VMW is ranked 14th in the 20 stock Growth Portfolio Power Rankings. The stock is not in the Aggressive Growth Portfolio because there’s not much upside to Fair Value. |
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Aggressive Growth Portfolio
N/A |
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