VMware (NYSE:VMW) is a provider of virtualization solutions from the desktop to the data center. The company’s suite of virtualization solutions addresses a range of complex information technology problems that include cost and operational inefficiencies, facilitating access to cloud computing capacity, business continuity, software lifecycle management and corporate computing device management.
Just last week the company announced its new VMware View technology-preview clients for the Kindle Fire, Mac and Linux, along with updates for its Android and iPad clients. This flexibility among platforms, as well as the ability to transcend them with cloud infrastructure solutions, makes this a name you’ll want to know as the cloud revolution takes off.
VMware works closely with more than 1,700 technology partners, including server, microprocessor, storage, networking and software vendors. Its solutions are based upon its core virtualization technology and are organized into four main product groups: Cloud Infrastructure, Cloud Application Platform, End-User Computing, and Virtualization and Cloud Management.
After a sharp sell-off following the recent Oracle (NASDAQ:ORCL) earnings debacle, VMW is gaining back most of those losses. Several analysts have upped the shares based on valuation, and we tend to agree. Given the 35% growth rate in VMW earnings, its forward P/E of 34 seems reasonable. With nearly $9.50 per share in cash, the company’s forward P/E ex-cash is less than 30.
Technically, the shares have held support three times at the $76 level, each time bouncing sharply off the support level to move back to the previous highs.
Given VMware’s dominance in the fast-growing cloud computing space, we look for the stock to head back to the old highs of $102 by July expiration.
Based on VMW’s current market price of $85.12 and using a target price of $102.00, a target date of July 20, 2012, and $10,000 of investment capital, this is an excellent candidate for capturing some nice upside by buying a VMW July 65 Call, buying a July call spread or selling a July put spread.
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