Barron’s recently ran an article describing potential weaknesses in the VMWare (VMW) business model. The analysis quotes a Cowen researcher as saying "that VMware is increasingly selling software under enterprise license agreements, which results in companies making larger upfront purchases," Larger upfront purchases could mean less revenue for VMW down the road.
But, Wall St. analysts in general must still love the company. Although Thomson/First Call shows that sixteen analysts polled on the company have an average 2.7 rating on VMWare with a 1 being a strong buy and a 5 being a strong sell, the same group has a mean target price on the stock of over $109.
VMWare trades at about $72. Analysts are assuming that the shares can move up 51%. That is a pretty long bet.
Douglas A. McIntyre