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VMware Inc Class A VMW

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

VMware’s Subscription and SaaS Growth Decelerates in Q2; Shares Undervalued Versus Our $202 FVE

Mark Cash Senior Equity Analyst

Analyst Note

| Mark Cash |

We are maintaining our fair value estimate of $202 for narrow-moat VMware after its second-quarter results topped our expectations for revenue growth and adjusted earnings. The strength shown in the quarter was derived from higher-than-expected term and perpetual license sales as VMware’s transition toward subscription and SaaS decelerated in the quarter. Shares fell by more than 5% after reporting, which we view as near-term concerns regarding subscription and SaaS traction. With a longer-term view, we believe shares offer considerable upside as we see VMware in a unique position to neutrally facilitate application and infrastructure needs across any networking environment in a cloud-first world.

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Company Profile

Business Description

VMware, a majority-owned subsidiary of Dell, is an industry leader in virtual machines for data center servers and computer desktops. The software provider operates in the three segments of licenses, subscriptions and SaaS, and services. Customers include enterprises utilizing data centers, end-user computing, cloud providers, and software-defined networking. The Palo Alto, California, firm operates and sells on a global scale, with about half its revenue from the United States, through direct sales, distributors, and partnerships.

Contact
3401 Hillview Avenue
Palo Alto, CA, 94304
T +1 650 427-5000
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Aggressive Growth
Employees 34,000

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