VMWare Inc.
(NYSE: VMW) saw a spectacular initial public offering back in the
middle of 2007, but has since retreated to somewhat reasonable levels.
The stock traded as high as $125 per share in late October before
retreating to its current levels around $80 per share. It now appears
that the company has attracted some analysts who believe the investment
looks conservative today.
William Blair & Company initiated research coverage on VMWare
with a Market Perform rating and an Aggressive Growth company profile.
Analyst Laura Lederman estimated 2007 pro forma EPS at $0.80, $1.14 for
2008, and $1.60 for 2009. These numbers put the company’s current P/E
ratio at around 100x on a trailing 12-month basis, 70x forward 2008,
and 50x forward 2009. These ratios make the stock look almost
conservative trading at these levels considering it is the market
leader in a fast-growing industry.
The analyst noted, “We have covered the software space for more than
20 years and rarely have we found a solution with a cost-savings
proposition as compelling as virtualization software. In fact, many
software products do not deliver a positive quantifiable return on
investment, but VMware’s virtualization software can greatly lower IT
costs and increase hardware utilization (from 10%-15% to roughly 80%)
by aggregating servers into shared pools of IT capacity. This
tremendous savings in hardware and management resources explains why
the server virtualization market and, in particular, VMware are growing
so quickly.”
Lazard Capital also initiated coverage on the company with a Buy
rating earlier this month. Currently, the average price target from
analysts on Wall Street stands at around $105 per share. In the end,
server virtualization is a quickly growing industry that is expected to
grow to $10 billion by 2011. VMWare sits at the head of this new trend
and stands to benefit as a market leader. Combined, these factors make
VMW a stock worth watching!
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