Dell Technologies Inc, an American multinational technology company headquartered in Texas, is exploring options of a spinoff for its $50 billion stake in VMware Inc to increase its stock value, according to a Wall Street Journal report.
The tech giant has recently sought options either to sell its existing stake or consider other options, including the full buyout of VMware. People familiar with the matter told the WSJ that the companies are working with outside advisers. The share offload will also come a long way in helping Dell to ease its $48 billion debt load.
However, both the companies are unlikely to ink a deal this year as the examinations are at an early stage and Dell may even choose to opt-out and do nothing.
The review is aimed at addressing the difference in Dell’s market value – roughly $36 billion as of June 23 and the 81% stake value in VMware. The gap indicates that Dell’s PC and data storage business is gaining very less or no attention in the market. However, dismantling the companies could add value further, the international daily newspaper based in New York City added.
Immediately after The Wall Street Journal reported on the review, investors’ optimism soared, pushing shares of both companies higher. On Tuesday, Dell shares jumped over 14%, following a 1.5% gain to close at $49.01, while VMware climbed 8% and closed about 1% higher $149.23.
Dell outlook and target price
Eight analysts forecast the average price in 12 months at $48.57 with a high of $55.00 and a low of $42.00. The average price target represents a -0.90% decrease from the last price of $49.01, according to Tipranks. From that, two analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.
It is good to buy at the current level for the short-term as 20-day Moving Average and 20-200-day MACD Oscillator signals a buying opportunity.
On June 1, Citigroup raised price target to $55 from $40. Last month, Deutsche Bank raised price target to $55 from $52, Instinet raised to $55 from $35, Credit Suisse raised to $44 from $41 and Evercore ISI raised target price to $54 from $46.
VMware outlook and target price
Eighteen analysts forecast the average price in 12 months at $170.31 with a high of $200.00 and a low of $140.00. The average price target represents a 14.13% increase from the last price of $149.23, according to Tipranks. From that, twelve analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.
It is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity. Today, Stifel raised to ‘Buy’ from ‘Hold’; raised target price to $196 from $166. In May, CCFRA raised to ‘Buy’ from ‘Hold’, raising the target price to $180 from $154; BMO to $165 from $152 and Wells Fargo raises to $200 from $190.