Shares were up 3.2% to $156. Analyst Mark Moerdler also raised his price target on the Palo Alto, California-based company to $181 from $171.
Moerdler said in a note to investors that VMware will beat Wall Street's earnings expectations when it reports later this month because "the downside risks are baked into
VMware’s stock price while the upside opportunities are not.”
Moerdler said he raised his revenue and earnings expectations above consensus after breaking down each of the company's businesses and growth potential.
Dell Technologies (DELL) - Get Free Report owns roughly 80% of VMware and Moerdler said that investors had been concerned about the Dell overhang and if or when the server virtualization business could decline.
Moerdler predicted that the company's compute and management business will grow in the imid-single digits near term “as it will be a hybrid Cloud world for the foreseeable future."
He also sees VMware's acquired/growth portfolio growing at a low teens CAGR (compound annual growth rate) in the near term.
CRN reported that VMware recently laid off hundreds of workers in what the company called "a workforce rebalancing." Several top executives also left the company, CRN said.
In November, the company topped analysts' third-quarter earnings estimates.
VMware reported net income of $621 million, or $1.50 a share, or adjusted earnings of $1.49 a share, on sales of $2.46 billion, up from $2.2 billion a year ago. Analysts were expecting the company to report earnings of $1.41 a share on revenue of $2.41 billion.