Rocketing to a price of $122.44 during today's afternoon trading session, shares of Vmware are still -13.29% below their average target price of $141.21. Could there be more upside potential for the stock? Analysts are giving VMW an average rating of buy and target prices ranging from $124.3 to $170 dollars per share.
The market seems to share this rosy outlook, since Vmware has a short interest of only 3.5%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
We can make inferences about the market sentiment surrounding Vmware by analyzing its rate of institutional ownership. If institutions such as hedge funds and pension funds are the primary shareholders of a corporation, it most likely means that its shares are a good investment according to those institutions' analysts.
At 49.1%, the rate of institutional ownership is average, indicating that a sufficient number of institutions have concluded that it is a stable investment. Beware, however, that the rate of institutional ownership could also indicate an ongoing proxy battle or takeover attempt -- so you should also periodically check the news about a stock whose institutional ownership you are tracking.
Overall, there is mixed market sentiment on Vmware because its an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are VMW's recent cash flows:
| Date Reported | Cash Flow from Operations ($) | Capital expenditures ($) | Free Cash Flow ($) | YoY Growth (%) |
|---|---|---|---|---|
| 2022-01-28 | 4,357,000,000.0 | -386,000,000.0 | 3,971,000,000.0 | -2.67 |
| 2021-01-29 | 4,409,000,000.0 | -329,000,000.0 | 4,080,000,000.0 | 13.55 |
| 2020-01-31 | 3,872,000,000.0 | -279,000,000.0 | 3,593,000,000.0 | 5.58 |
| 2019-02-01 | 3,657,000,000.0 | -254,000,000.0 | 3,403,000,000.0 | n/a |
