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Alberto Abaterusso
Alberto Abaterusso
Articles (1671) 

VMware Inc. Falls on Earnings Beat

Revenues increase

May 31, 2019 | About:

Shares of VMware Inc. (NYSE:VMW) fell 2.69% to $185.95 in after-hours trading on Thursday after surpassing consensus estimates on non-GAAP earnings for the first quarter of fiscal 2020. The company beat by 4 cents, posting $1.32 per share, which was 5% higher year-over-year.

GAAP earnings were $1.21 per share, which was a 47.2% improvement, beating expectations by 47 cents.

Revenue grew nearly 13% to $2.27 billion, beating expectations by $20 million. By segment, license revenue rose 12.3% to $869 million and services revenue increased 12.6% to nearly $1.4 billion.

The Palo Alto, California-based computer software provider also noted a decline of 70 basis points in GAAP operating margin to 18.3% and a 30 basis-point decrease in non-GAAP operating margin to 29.5%. Operating cash flow came to $1.27 billion and free cash flows were $1.2 billion.

What’s more, during the quarter the board of directors of VMware authorised the repurchase of approximately $1.5 billion of its common stock, adding to the $243 million still be repurchased under the previous program.

“Q1 was a good start to fiscal 2020 with strength across our comprehensive solutions portfolio,” CEO Pat Gelsinger said in a statement.

Gelsinger added that the company inked agreements with Amazon Web Services, Dell and Microsoft, to accelerate the digital transformation of VMware’s customers through the company’s cloud infrastructure technology.

The balance sheet had $3.31 billion in cash on hand and short-term securities, $3.97 billion in long-term debt and $7.12 billion in unearned revenues as of May 3.

The stock closed at $191.09 per share on Thursday for a market capitalization of about $78.4 billion. Following 39% growth for the 52 weeks through May 30, the share price is substantially above the 200 and 100-day simple moving average lines. It is also near the 50-day simple moving average line. The 52-week range is $129.33 to $206.80.

The 14-day relative strength index of 44 suggests the stock is neither oversold nor overbought.

Wall Street issued an overweight recommendation rating for shares of VMware Inc and an average target price of $193.75.

The overweight recommendation rating means that the stock is foreseen to continue to outperform within 12 months as well.

Disclosure: I have no position in any securities mentioned.

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About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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