VMW Falls on Lower Price Target
SAN FRANCISCO - On a tumultuous day for stocks, VMware (VMW) was feeling more than its share of pain.
The virtualization software supplier dropped $3.69, or 7.4%, to $46.09 after a sell-side analyst issued a note lowering the one-year price target. By comparison the iShares S&P GSTI Software Index (IGV) was off 2.5%, while the Nasdaq was down 1.9%.
Baird analyst Jayson Noland lowered his price target on Palo Alto, Calif.-based VMware to $50, from $80, "to reflect multiple contractions in a more difficult macroeconomic environment."
"We continue to believe VMware's compelling growth opportunities are balanced by already large ... competitive threats," Noland wrote. The new price target is roughly 30 times 2009 earnings expectations.The consensus 12-month price target is $62.50, according to Thomson Financial. Just over a week ago, the target was $72. The company is expected to post EPS of $1.10 in 2008 and $1.55 in 2009. In addition to smaller, privately held competitors such as Virtual Iron, other virtualization providers posing a risk to VMware revenue include Citrix (CTXS), which sells Xen open source software, and Microsoft (MSFT) which will add virtualization capability to its Windows Server software later this year. The company, which is majority owned by EMC (EMC) has projected 50% top line growth for 2008, which would give it revenue of nearly $2 billion. Shares of EMC were recently down 44 cents, or 3%, to $14.35 on news that its buyout target Iomega (IOM) has agreed to negotiate following EMC's revised offer of $3.75 a share. Iomega was recently up 9% to $3.56.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV