logo
logo
Sign in

VMware's Q2 Financial Results Generate Mixed Expectations for the Coming Year

avatar
Pravin Gupta
VMware's Q2 Financial Results Generate Mixed Expectations for the Coming Year

On July 18, 2016, VMware announced the results of its Q2 operations. Yesterday itself, the company's shares went up by 9 percent. Slightly healthy skepticism has been noted in regard to the company's shares. Their rating were not raised by any analyst whatsoever although the price target had been raised by many modestly.

After reporting a disappointing Q3 earning in last October, VMware has got a new breather with the 19 percent increase in its shares. In the same time span, there has been an increment in the IGV software index by nearly 9 percent. As compared to the unchanged IGV index, VMW shares have appreciated by nearly 14 percent.

The shares have remained cheap. In the last quarter, there was a jump in operating cash flow by 82 percent year after year. What actually drove this improvement was the change occurring in deferred revenues which became two times year on year. Growth still remains the biggest question. For top line growth, forecast is 5 percent in this year. Analysts are more skeptical that the reputed firm will grow marginally.

At present, consensus price target of exactly 23 reporting analysts comes out to be $70. Analysts are dubious in regard to the management forecast.  A big question now is if that is reasonable enough. When earnings got released in October, there was a sharp drop in the company's shares based on the operating performance.

In the next two weeks, there was a drop in shares as they lost 37 percent of their existing value. Now before making an overall low for the running year, shares lost 10 percent of their value. Growth of revenue in the quarter remained pretty consistent with the growth witnessed in previous several quarters.

There was an overall growth of 6 percent in the quarter while service growth remained 9.3 percent for that specific period. The company’s GAAP operating margins also increased by considerable amount. While GAAP margins were 13.5 percent in 2015, the same increased to 19 percent this year.

Experts say that the company's investment case corresponds totally to the future growth. With plenty of operating leverage still in hand, its expected that margins can increase further. The company though has not made considerable acquisitions in the past few years but it may in the coming years. VMware last acquired Air Watch for $1.54 billion in the year 2014.

Overall, VMware has a healthy balance sheet with immense capacity of cash generation. Industry experts have the opinion that the reputed company along with its partners Dell and EMC will surely witness much improved results in the coming year for sure.

 

About the Author

Deepak Nautiyal is the chief editor at Techarex Networks. Using his vast experience in business and technology domains, he has produced several articles and blogs on a variety of subjects related to business and QuickBook Cloud Hosting. In his free time, he loves surfing the web and exploring interesting places around the world.

collect
0
avatar
Pravin Gupta
guide
Zupyak is the world’s largest content marketing community, with over 400 000 members and 3 million articles. Explore and get your content discovered.
Read more