Why VMware, Inc. Will Keep Vaulting in 2014

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of VMware, (NYSE: VMW  ) edged up slightly today after Citigroup upgraded the virtualization software specialist from Neutral to Buy.

So what: Along with the upgrade, analyst Walter Pritchard boosted his price target to $120 (from $87), 22% worth of upside to yesterday's close. While value investors might be turned off by VMware's sharp run-up in recent months, Pritchard believes there's plenty of room to run given his view of better-than-expected growth going forward.

Now what: Citigroup expects VMware's double-digit growth to accelerate 2014. "Our checks with resellers, recent survey work as well as deeper modeling suggest 2H13 growth trends remain sustainable into 1H14," Pritchard noted. "ELAs cycle appears more diffused than we estimated, while vSphere capacity / pricing is stable and vCloud management tools penetration is still low, but improving. Lastly, hiring plans in S&M look bullish." When you couple those positive operating trends with VMware's rock-solid financial position, it's pretty tough to disagree with Citigroup's upgrade.

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