Back to top

Image: Bigstock

Bear Of The Day: VMWare (VMW)

Read MoreHide Full Article

VMWare (VMW - Free Report) is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today.  Let’s take a look at why this stock fell to the lowest Zacks Rank and if it is still something that you should look at.  VMW reports earnings again on February 25, so let take a look at the earnings history.

Earnings History

Anytime I look at a company I look at the earnings history first.  Does management have the capability of guiding Wall Street to a beatable level?  The answer for VMW is yes.

Over the last four quarters I see three beats… and they are good sized beats.

The average positive earnings surprise over the last four quarters is 15%, and that is a good thing, not a bad thing… so why is this the lowest Zacks Rank?

Earnings Estimate Revisions

The key to the Zacks Rank is move in earnings estimates.  Positive estimate revisions send stocks to a higher Zacks Rank and vice versa.  If you are a fundamental investor, you know that higher earnings will lead to higher stock prices.

The estimates for VMW are headed lower.

This isn’t holistically true, as the 2021 number have moved from $6.64 to $7.05, but next year has seen estimates move from $7.21 to $7.00.

The fact that this has made VMW a Zacks Rank #5 (Strong Sell) tells me that estimates are moving up for most stocks.

Valuation

The valuation for VMW is a ok with the forward PE of 20x just a little over the market multiple.  There was 16% topline growth in the most recent quarter.  The forecast for next fiscal year is topline growth of 8%, but don’t be surprised if that number doesn’t increase soon.

I see a 7x price to book, but that is to be expected from an asset slim name like this.  Price to sales at 5x is actually somewhat low… and that makes me want to dive in deeper into this name.

 

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


VMware, Inc. (VMW) - free report >>