Top 5 Things Traders Have to Watch This Week

Earnings

Disappointing earnings results last week from the likes of Walmart, Target, and others revealed that supply chain dislocations and skyrocketing labor costs have delivered deeper-than-expected damage to company balance sheets as changing consumer habits and higher prices begin to crimp sales.

The headwinds have forced cuts to full-year forecasts that some insiders fear may need to be lowered further, especially if the economy slips into a recession as many bears expect.

Retailers reporting this week include Advance Auto Parts today, followed by AutoZone, Best Buy, and Nordstrom on Tuesday; Dick’s Sporting Goods and Williams Sonoma on Wednesday; American Eagle, The Buckle, Burlington Stores, Costco, Dollar General, Dollar Tree, The Gap, Macy’s, and Ulta Beauty on Thursday.

Investors are also nervous ahead of some key tech earnings this week, including Zoom today; Intuit Tuesday; NVIDIA and Snowflake on Wednesday; and VMware on Thursday.

Federal Reserve

Turning to the Federal Reserve, there are only a couple of speakers scheduled this week, though one of those is Fed Chair Jerome Powell, who delivers opening remarks at an economic conference in Vegas tomorrow.

The speech is expected to be pre-recorded, however, and he won’t be taking questions, so it may not provide much in the way of new insight.

Wednesday brings the “minutes” from the Fed’s May FOMC policy meeting which could provide clues as to the size of upcoming rate hikes. Wall Street widely expects the Fed will lift its benchmark rate by 50-basis points at both its June and July meetings.

From perspective, the stock market is trading poorly because of Fed uncertainty, the market is trading poorly because investors are nervous and uncertain about how companies are going to perform in the wake of the shift in Fed policy. In other words, I think the market might still be too overly optimistic considering the underlying landscape and shift in Fed rhetoric from easing to tightening.

Economic data

The economic data highlight this week will be the Core PCE Prices Index on Friday. The Core PCE Index, which strips out food and energy, is one of the Fed’s preferred inflation gauges. The year-over-year headline rate rose +6.6% in March, while the Core rate actually pulled back a tenth of a percentage point to +5.2%.

Bulls are hoping to see more meaningful signs that consumer prices are starting to moderate in April’s numbers. Inflation hawks warn that even if price gains slow or stall, that still leaves it running at more than double the Fed’s target +2% rate and question where real price declines are even possible in the near-future.

War in Ukraine

Russia’s war in Ukraine complicates the outlook even further as it has such extreme repercussions for commodities.

As long as upward pressures remain on energy, food, fertilizers, metals, and other key materials, inflation will be hard to reverse. And as many commodities and supply chain experts continue to warn, even if the war ended tomorrow, the fallout could be felt for several years considering the massive infrastructure destruction, the seasonality of crops, a loss of workers, etc.

The war in Ukraine and global inflation pressures will be key topics at the annual World Economic Forum in Davos, Switzerland, this week. The conference is usually held in January but this year’s event was rescheduled for May 22 to May 26, marking the first in-person version of the conference in over two years. There are only a handful of U.S. officials attending and no big Fed names, at least none that have been announced.

The conference typically generates a lot of financial headlines as attendees usually include leaders from many top global companies as well as political leaders and central bankers from across the world.

Monkeypox

It’s also worth noting some growing talk concerning outbreaks of “Monkeypox” in 15 countries, including here in the U.S. While some cases have been linked to travel from Africa, where the disease is generally found, more recent infections are thought to have spread in the community. However, scientists stress that the root cause of the recent spike in cases remains very much unclear at this point.

The disease is from the same family as smallpox but typically less severe. It requires close contact with an infected person for the virus to spread and health authorities say the risks to the general public remain very low. However, there is always a concern that a disease outbreak will prompt the media to go nuts with the headlines and perhaps spook the consumer at a time when some fear the economy is already experiencing a slowdown.

Vmware Is Up By 20%, Here Is Why

Key Insights

  • Vmware stock rallies as Broadcom is reportedly working on a deal to purchase the company. 
  • The deal is reportedly valued at $50 billion. 
  • Vmware stock has already jumped by 20% at the start of the trading session, which limits the potential upside. 

Broadcom Could Be Ready To Buy Vmware

Shares of software virtualization company Vmware gained strong upside momentum after reports indicated that Broadcom was willing to buy the company. According to the reports, negotiations were still ongoing and the deal was not imminent.

Vmware stock peaked back in 2019 near the $207 level and was trading below the $100 level before the reports were released. It should be noted that the stock managed to recover to the $170 level after the coronavirus-related sell-off in 2020 but lost momentum and has been under pressure for months.

As a result, the stock declined to attractive valuation levels. Analysts expect that Vmware will report earnings of $7.02 per share in the current fiscal year and earnings of $7.78 per share in the next fiscal year, so the stock was trading at just 12 forward P/E before Broadcom’s desire to buy Vmware was made public.

What’s Next For Vmware Stock?

According to Financial Times, the deal could be valued at $50 billion. Vmware stock has already moved closer to this level, although the stock will continue to trade at a discount to the potential value of the deal.

Analyst estimates for Vmware have been recently moving lower, but the stock was already trading at attractive valuation levels, which has likely served as one of the key catalysts behind Broadcom’s interest in the deal.

Vmware stock is already up by 20% at the start of the trading session, so its potential upside would be limited as the reported valuation implied a 25% premium to Vmware’s previous closing price.

At the same time, it remains to be seen whether Vmware shareholders would be ready for a deal with a modest premium after the stock has been declining for months, so this story could get a few more twists along the way.

To keep up with the latest earnings updates, visit our earnings calendar.

Wall Street Week Ahead Earnings: Caesars Entertainment, Home Depot, Lowe’s and Moderna in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 21

Monday (February 21)

The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday (February 22)

IN THE SPOTLIGHT: CAESARS ENTERTAINMENT, HOME DEPOT

CAESARS: The largest casino-entertainment Company in the U.S. company is expected to report its fourth-quarter loss of $-0.71 per share, up over 58%, better compared to a loss of $-1.7 per share seen in the same period a year ago. The Las Vegas-based company would post revenue growth of over 77% to $2.58 billion.

Caesars Entertainment (CZR) is currently trading at below its historical NTM multiple on 2023e EBITDAR, despite our expectation of >1,000bps higher core casino margins and faster growth. We believe regional casino markets (55% of mix) have structural tailwinds from customers acquired post-COVID and sports betting legalization,” noted Thomas Allen, equity analyst at Morgan Stanley.

“We expect CZR to improve its sports betting / iGaming market share in coming qtrs, a key driver to Gaming stocks in recent years. High leverage now (7.5x at YE21) but significant FCF and a planned Vegas asset should drive leverage to ~5x by YE22, opening up a broader investor base.”

HOME DEPOT: The largest home improvement retailer in the United States is expected to report its fourth-quarter earnings of $3.22 per share, which represents year-over-year growth of over 17% from $2.74 per share seen in the same period a year ago.

The home improvement retailer would post revenue growth of over 7% to $34.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We are Overweight Home Depot (HD) given its best-in-class nature and structural housing tailwinds beyond N-T disruption from COVID-19. The stock seems attractively valued in the context of a potential 2021/2022 economic/housing boom,” noted Simeon Gutman, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 22

TICKER COMPANY EPS FORECAST
CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

 

Wednesday (February 23)

IN THE SPOTLIGHT: LOWE’S

Home improvement retailer Lowe’s is expected to report its fourth-quarter earnings of $1.69 per share, which represents year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago. The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 23

TICKER COMPANY EPS FORECAST
BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

 

Thursday (February 24)

IN THE SPOTLIGHT: MODERNA

Moderna, the biotech company focused on drug discovery, is expected to report its fourth-quarter earnings of $8.62 per share, which represents year-over-year growth of over 1,340% from a loss of -$0.69 per share seen in the same period a year ago.

The Massachusetts-based biotechnology company would post revenue growth of 1,075% to around $6.71 billion.

“We are Equal-weight Moderna. While we believe there is long-term upside for Moderna, we believe the significant valuation increase associated with the success of the COVID-19 vaccine limits the near-term upside,” noted Matthew Harrison, equity analyst at Morgan Stanley.

“The company has taken an industrialized approach to developing mRNA based therapeutics and has rapidly generated a broad pipeline of 21 programs, 11 of which have entered clinical development. We believe Moderna’s mRNA drug development platform is more diversified and scalable compared with competitors, and is validated through broad partnerships with Merck and AstraZeneca. We see vaccines and rare diseases as the key valuation drivers of the company.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 24

TICKER COMPANY EPS FORECAST
ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

 

Friday (February 25)

TICKER COMPANY EPS FORECAST
AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

 

Earnings to Watch in Holiday-Shortened Week: Zoom, Medtronic, Best Buy, Dollar Tree and Deere in Focus

Earnings Calendar For The Week Of November 22

Monday (November 22)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal third-quarter earnings of $1.09 per share, which represents year-over-year growth of over 10% from $0.99 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of over 30% to $1.02 billion. Zoom will report 3Q FY22 earnings after market close on Monday, November 22.

“Investors lean cautious heading into FQ3 print given ongoing concerns around SMB churn, particularly as other WFH names have underperformed. View FQ4 print as having more favourable risk/reward, but given cautious positioning, could see outperformance if SMB churn is better than expected,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. The company has a meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into the broader UC market. Early wins are encouraging. Opportunities to expand the platform remain. Manageable churn post-COVID as a move to hybrid work setups.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 22

Ticker Company EPS Forecast
JKS JinkoSolar Holding Co. Ltd. ADR -$0.07
GRFS Grifolsbarcelona $0.29
JOBS 51job $4.45
GGAL Grupo Financiero Galicia $0.68
ZM Zoom Video Communications $1.09
A Agilent $1.18
KEYS Keysight Technologies $1.64
URBN Urban Outfitters $0.83
BMA Banco Macro $1.22
TLK Telekomunikasi Indns Tbk Prshn Pp Pt $0.46

Tuesday (November 23)

IN THE SPOTLIGHT: MEDTRONIC, BEST BUY, DOLLAR TREE

MEDTRONIC: The medical device company is expected to report its fiscal second-quarter earnings of $1.29 per share, which represents year-over-year growth of over 26% from $1.02 per share seen in the same period a year ago.

The company has beaten earnings per share (EPS) estimates all times in the last four quarters with a surprise of over 13%. The Fridley, Minnesota-based medical company would post revenue growth of nearly 4% to $7.9 billion.

Medtronic (MDT) commentary and guide should act as a barometer for MedTech recovery through the balance of ’21 and into ’22. More muted recovery through October could incrementally pressure 2FQ, with the path to 9% y/y FY22 growth looking increasingly challenging in the face of recent sector headwinds,” noted Cecilia Furlong, equity analyst at Morgan Stanley.

BEST BUY: The Richfield, Minnesota consumer electronics retailer is expected to report its fiscal third-quarter earnings of $1.93 per share, which represents a year-over-year decline of over 6% from $2.06 per share seen in the same period a year ago.

The consumer electronics retailer’s revenue would decline 2.5% to $11.56 billion down from $11.85 billion a year earlier. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Market looking for a 4-5% comp in Q3 vs cons at -1.5%. We see upside to 2H’21 numbers and expect a raised full-year guide as demand remains strong. That said, momentum is slowing and the category could shrink in ’22/’23. The stock is +15% in the last month, and a Q3 beat and raise seems priced in,” noted Simeon Gutman, equity analyst at Morgan Stanley.

DOLLAR TREE: The Chesapeake, Virginia-based company is expected to report earnings of $0.96 per share in the third quarter, down over 30% from $1.39 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of nearly 4% to $6.4 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 23

Ticker Company EPS Forecast
CPG Compass Group £17.93
BYG Big Yellow £19.26
MDT Medtronic $1.29
BBY Best Buy $1.93
DLTR Dollar Tree $0.96
J Jacobs Engineering Group Inc $1.57
BURL Burlington Stores $1.24
SJM J.M. Smucker $2.04
DKS Dick’s Sporting Goods $2.03
PLAN Progressive Planet -$0.11
AEO American Eagle Outfitters $0.60
ANF Abercrombie & Fitch $0.65
DY Dycom Industries $0.75
JWN Nordstrom $0.56
NOAH Noah $2.95
VMW VMware $1.54
HPQ HP $0.88
GME GameStop -$0.51
CPB Campbell Soup $0.81
GPS Gap $0.50
SVT Severn Trent £49.79

Wednesday (November 24)

IN THE SPOTLIGHT: DEERE

Deere & Company, the world’s largest maker of farm equipment, is expected to report its fiscal fourth-quarter earnings of $3.92 per share, which represents year-over-year growth of over 64% from $2.39 per share seen in the same period a year ago.

The agricultural, construction and forestry equipment manufacturer would post revenue growth of more than 20% to $10.5 billion. It is worth noting that in the last two years the company has delivered an earnings share price (EPS) at all times.

“Despite positive secular demand fundamentals within both the Ag and Construction businesses we are lowering near-term estimates for Deere (DE) (F4Q21/F1Q22) to better reflect the impact from lost production in the US stemming from supplier bottlenecks and the labour strike,” noted Stephen Volkmann, equity analyst at Jefferies.

“We assume any lost production elongates the cycle, and we maintain our above Consensus estimates for 2023 noting additional upside from the infrastructure bill has yet to be factored into outlooks.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE NOVEMBER 24

Ticker Company EPS Forecast
UU United Utilities £25.21
JMAT Johnson Matthey £44.57
BVIC Britvic £31.37
DE Deere & Company $3.92
TCOM Trip.com Group Ltd $0.11
KC Kutcho Copper -$1.53

Thursday (November 25)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

Friday (November 26)

No major earnings are scheduled for release. The U.S. stock market will be closed for the Thanksgiving holiday.

VMware 1Q22 Earnings to Rise Nearly 4%, Revenue to Jump 7%

The California-based tech giant VMware is expected to report its fiscal first-quarter of 2022 earnings of $1.58 per share, which represents year-over-year growth of about 4% from $1.52 per share seen in the same period a year ago.

The California-based cloud computing and software company would post revenue growth of nearly 7% to $2.9 billion. In the last four quarters, on average, the company has beaten earnings estimates over 18%.

On May 12, VMware’s board of directors announced Raghu Raghuram as its new CEO effective June 1, 2021.

“We are maintaining our $202 fair value estimate for narrow-moat VMware after the company announced that current COO Raghu Raghuram will become CEO and also released strong first-quarter preliminary results,” noted Mark Cash, senior equity analyst at Morningstar.

“Our expectation was for one of VMware’s two current COOs to become CEO, and we positively view the company tapping its leadership bench, given the moving pieces in the organization. VMware has various sizable franchises pivoting their offerings, is shifting toward subscriptions amid tight integration with cloud partners and is being spun off from Dell toward the end of 2021.”

VMware shares rose over 15% so far this year.

Analyst Comments

“With overhangs around the CEO transition and Dell ownership behind us, focus shifts to durability of growth. Our channel work speaks to improving, but not yet fully recovered fundamentals. While a positive indicator, investors likely await data on Cloud traction and margin durability,” noted Keith Weiss, equity analyst at Morgan Stanley.

“Investors are likely looking for revenue, margins, and EPS in-line with pre-announced numbers and through of the Q1 outperformance into an updated FY22 guidance. Within Q1 results, however, we also think the mix of license / Subscription & SaaS revenue will be important, as investors try to understand the pace of subscription transition and implications on topline and margins going forward.”

VMware Stock Price Forecast

Fifteen analysts who offered stock ratings for VMware in the last three months forecast the average price in 12 months of $170.08 with a high forecast of $180.00 and a low forecast of $150.00.

The average price target represents a 5.39% increase from the last price of $161.38. Of those 15 analysts, seven rated “Buy”, eight rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $156 with a high of $193 under a bull scenario and $94 under the worst-case scenario. The firm gave an “Equal-weight” rating on the technology company’s stock.

Several other analysts have also updated their stock outlook. VMware had its target price upped by Piper Sandler from $158 to $180. They currently have an overweight rating on the virtualization software provider’s stock. BMO Capital Markets lowered VMware from an outperform rating to a market perform rating and cut their price target for the stock to $148 from $157.

UBS Group cut their price target to $145 from $152 and set a neutral rating on the stock. Bank of America reaffirmed a neutral rating and set a $175 price target.

Check out FX Empire’s earnings calendar

VMware Shows Signs of Recovery But Margins and Management Remain Unresolved: Morgan Stanley

Morgan Stanley in its latest research note said their channel work on the California-based tech giant VMware pointed towards sequential improvement in the fourth quarter and similar expectations for the first quarter, though macro pressure still lingers.

On Thursday, Palo Alto cloud computing and software company is widely expected to report EPS of $2.05 per share in the fourth quarter. That was in line with Morgan Stanley’s forecasts of $2.05 per share.

The investment bank forecasts a total revenue of $3.23 billion, up 5.1% year-over-year, in line with the market consensus estimates of +5% y/y growth. Morgan Stanley forecasts EBIT of $1.09 billion (33.6% margin) to round out FY21 at $3.74 billion (32% margin), in line with guidance and consensus.

“Beyond an improving top line, however, the stock performance will likely be tied to two other factors: 1) margins – preliminary guidance suggesting margin compression of 4% points YoY in FY22, therefore heavily pressuring near-term EPS growth; and 2) management – with CFO Zane Rowe as interim CEO, VMware‘s Board is currently searching for a permanent replacement after Pat Gelsinger’s departure. As such, even with shares at 20x CY22e P/E, trading at a meaningful discount to the large-cap average of 29x, we remain ‘Equal-weight’ on these uncertainties,” wrote Keith Weiss, equity analyst at Morgan Stanley.

VMware’s shares, which declined about 8% in 2020, had risen over 3% so far this year. The stock closed 1.54% higher at $144.68 on Friday.

Seventeen analysts who offered stock ratings for VMware in the last three months forecast the average price in 12 months at $167.21 with a high forecast of $199.00 and a low forecast of $145.00.

The average price target represents a 15.57% increase from the last price of $144.68. From those 17 equity analysts, nine rated “Buy”, eight rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $156 with a high of $193 under a bull scenario and $94 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the IT company’s stock.

Other equity analysts also recently updated their stock outlook. Mizuho cut their target price on shares to $147 from $152 and set a “neutral” rating. Cleveland Research lowered shares to a “neutral” rating from a “buy”. Barclays dropped their price target to $180 from $187 and set an “overweight” rating. At last, Piper Sandler increased their price objective to $179 from $170.

“Improved Positioning Largely Priced In: Over the last several years, fast-growing ‘Act 2’ product categories including vSAN, NSX and EUC have scaled to drive a better growth profile at VMware. However, the necessity of further investment to improve secular positioning weighs on op margins and EPS growth leaving the stock expensive on a PEG basis,” Morgan Stanley’s Weiss added.

“With CBLK and PVTL acquisitions closed, we wait for evidence of VMW‘s expansion strategy into security and app dev to take hold, as early partner conversations have been positive. Current trade of 20x CY22 P/E is a discount to the large-cap SW average/median of 29x/31x, justified considering VMW‘s on-premise exposure and margin pressure in FY22.”

Earnings to Watch Next Week: Palo Alto Networks, Home Depot, Nvidia and Salesforce in Focus

Dell Reports Surprise Revenue Growth in Q3; Target Price $82

Dell Technologies Inc, an American multinational technology company headquartered in Texas, reported a surprise quarterly revenue growth of about 3% to $23.48 billion as demand for remote working devices and desktops and notebook computers increased during the COVID-19 pandemic.

The leader in digital transformation said its total revenue rose 3% to $23.5 billion in the three months ended October 30, beating market expectations of a drop of 4.4% to $21.85 billion. Diluted earnings per share up 64% to $1.08, non-GAAP diluted earnings per share up 16% to $2.03, in line with the Wall Street estimates.

“Dell had record shipments, revenue, and profitability for its computer division, helping make up for weakness experienced within the server and storage business unit. While the pandemic may only be a temporary gusty tailwind for computer demand, we believe Dell’s hybrid-cloud offerings can provide it with a sustainable presence in the IT infrastructure stack for customers. We are maintaining our $65 fair value estimate and see shares as fairly valued,” said Mark Cash, equity analyst at Morningstar.

Dell forecasts revenue to grow 3% to 4% in the fourth quarter, implying a range between $24.18 billion and $24.42 billion, higher than the market expectations of $23.09 billion.

“While explicit guidance was not provided for fiscal 2022, Dell is cautiously optimistic that the demand environment for IT spending is improving. The company also believes it may be on the cusp of achieving investment-grade credit quality, which is up to the agencies and will continue to prioritize paying down its obligations,” Morningstar’s Cash added.

Dell Technologies shares closed 1.37% higher at $70.33 on Tuesday; the stock is up over 35% so far this year.

Executive Comments

“We met unprecedented demand for remote work and learn solutions this quarter while increasing revenue to $23.5 billion. At the same time, we accelerated our as-a-Service strategy and hybrid cloud capabilities at the edge – positioning us to win in these growing markets and making it easy for customers to manage data and workloads across all their operations,” said Jeff Clarke, vice chairman and chief operating officer.

Dell Technologies Stores Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at $72.78 with a high forecast of $82.00 and a low forecast of $60.00. The average price target represents a 3.48% increase from the last price of $70.33. From those ten analysts, seven rated “Buy”, three rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $82 with a high of $116 under a bull-case scenario and $39 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology company’s stock. JP Morgan raised their target price to $80 from $70 and UBS assumed coverage with a buy rating and set the target price at $80.

Several other analysts have also upgraded their stock outlook. Evercore ISI raised their target price to $75 from $70; BofA Global Research upped their price objective to $75 from $70; Deutsche Bank increased their stock price forecast to $72 from $65; RBC raised their target price to $80 from $48; Citigroup upped their price target to $75 from $55.

Analyst Comments

“Dell is a full-stack technology provider managing more data than any other IT provider, which positions the company well to capitalize on the ‘Data Era’. A path to IG rating in the next ~12 months along with accelerating market share gains across ISG and CSG segments warrant a valuation in-line with peers,” said Katy Huberty, equity analyst at Morgan Stanley.

“Dell’s strategic evaluation of its VMware stake (announced 7/15/20) and commitment to go-to-market synergies positions the company to unlock trapped value while retaining operational exposure to a key asset. Our base case valuation assumes a 50% probability of a VMware spin, meanwhile, our bull case valuation assumes a 100% probability,” Huberty added.

Upside and Downside Risks

Risks to Upside: 1) VMware spin and cash dividend accelerate core debt pay down. 2) Faster recession recovery & pent up demand. 3) Stronger share gains across PCs, Servers and Storage – highlighted by Morgan Stanley.

Risks to Downside: 1) Dell and VMW don’t agree on terms for a VMW spin. 2) Longer recession accelerates public cloud migration & legacy server/storage declines. 3) Rate of share gains across servers & storage is short-lived. 4) Slower debt paydown vs guidance.

Check out FX Empire’s earnings calendar

Dell Technologies Exploring Options of $50 Billion Stake Spinoff in VMware

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.