Please ensure Javascript is enabled for purposes of website accessibility

Why VMware, Inc. Will Keep Vaulting in 2014

By Brian D. Pacampara, CFA - Jan 16, 2014 at 2:32PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Does this analyst make a good case? Or is it just more noise from Wall Street?

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, (VMW 1.05%) 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.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends VMware. The Motley Fool owns shares of VMware. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

VMware, Inc. Stock Quote
VMware, Inc.
VMW
$122.25 (1.05%) $1.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
395%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.