NEW YORK (TheStreet) -- Shares of VMware (VMW) - Get Report were falling 15.2% to $58.31 on Wednesday after a number of analyst firms downgrade the virtualization software company following its third quarter earnings report and cloud partnership with EMC (EMC) announcement on Tuesday.
Sterne AgeeCRT downgraded VMware to "neutral" from "outperform" in a note to investors, cutting its price target to $75 from $88.
"With the absorption of the Virtustream operating losses into the model for FY2016 (OM now projected down ~400BPs Y/Y) along with unclear organic growth rates, we see too many near-term hurdles to expect the stock to trade to the higher end of historical Forward FCF multiple ranges (15-21x)," analyst Alex Kurtz wrote.
In its note Pacific Crest downgraded VMware to "sector weight" from "overweight" and lowered its EPS estimates through 2016.
"Weaker billings results were a function of customer uncertainty, speculation on the Federation and weakness in large global economies, all of which are unlikely to abate soon," Pacific Crest analysts wrote. "Creation of a new jointly owned company complicates an already confused narrative."
Robert W. Baird lowered its price target for the software company to $80 from $95 while maintaining an "outperform" rating.
"Management cited a secular shift related to cloud computing adoption as a contributor to lower-than-expected billings growth in the quarter," Baird analysts wrote. "This is not a new challenge for VMware, but it was enough to take the stock down in the after-market. We continue to view VMware as the best positioned software infrastructure provider for the software defined data center and hybrid cloud computing"
TheStreet Ratings team rates VMWARE INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate VMWARE INC (VMW) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, disappointing return on equity and weak operating cash flow.
You can view the full analysis from the report here: VMW