VMware, Inc. (NYSE:VMW) — This subsidiary of EMC Corporation (NYSE:EMC) is a leading provider of virtualization software. The company is in the process of transitioning to a broader provider of cloud-based infrastructure and mobile offerings.
S&P Capital IQ sees a healthy 10% to 12% increase in sales this year and next as a result of new product momentum and healthy growth in revenue from product licensing, maintenance and services.
Its analysts project earnings of $3.99 per share for 2015, up from $2.04 in 2014, and $4.61 in 2016. They estimate gross profit margins of 80%-plus for both 2015 and 2016 and have a price target of $93 on VMW stock.
Credit Suisse Group AG (ADR) (NYSE:CS) is even more optimistic. Its analysts expect EPS of $4.01 this year and $4.78 next year. They have a price target of $130.
On the chart, VMW stock completed a break from a huge “V” formation that began as a mild consolidation in mid-October. The pattern developed over six months, finally breaking out through a triple-top resistance line at about $56.
Of more interest technically is that it sliced through its resistance line, penetrating the 200-day moving average with a classic breakaway gap. This type of gap is seldom closed, but even if traders take profits, putting near-term pressure on shares, support rests at the bottom of the gap at about $85.
The trading target for this breakout is $96, which is 8% above current prices and could be accomplished within three weeks. Investors, however, may want to hold VMW stock for Credit Suisse’s higher objective of $130.
