Tumbling to a price of $121.72 during today's morning trading session, shares of Vmware are now -13.44% below their average target price of $140.62. Does this mean the stock will reverse course? Analysts are giving VMW an average rating of buy and target prices ranging from 120 to 170 dollars per share.
The market seems to share this rosy outlook, since Vmware has a short interest of only 1.8%. 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.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.
For what it's worth, institutions own 47.1% of Vmware's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.
Overall, there is positive market sentiment towards Vmware because of an analyst consensus of some upside potential, a buy rating, a very low short interest, and only a small number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about VMW:
It has trailing 12 month earnings per share (EPS) of $4.86 per share
Vmware has a trailing 12 month Price to Earnings (P/E) ratio of 25.0 while the S&P 500 average is 15.97
The company has a Price to Book (P/B) ratio of 5.6 in contrast to the S&P 500's average ratio of 2.95
Vmware is a Technology company, and the sector average P/E and P/B ratios are 26.5 and 5.57 respectively