Rocketing to a price of $128.1 during today's afternoon trading session, shares of Vmware are still -9.0% below their average target price of $140.77. Could there be more upside potential for the stock? Analysts are giving VMW an average rating of hold and target prices ranging from $135.0 to $147.0 dollars per share.
It seems the market sentiment regarding Vmware is mostly optimistic, since it has a short interest of only 3.2%. This is the percentage of the share float that is being shorted by investors who are hoping the stock's price will decrease 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 49.4% 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 mixed market sentiment on Vmware because its an analyst consensus of some upside potential, a hold 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 ($ k) | Capital expenditures ($ k) | FreeCashFlow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023-01-31 | 4,300,000 | -450,000 | 3,850,000 | -3.05 |
| 2022-01-31 | 4,357,000 | -386,000 | 3,971,000 | -2.67 |
| 2021-01-31 | 4,409,000 | -329,000 | 4,080,000 | 13.55 |
| 2020-01-31 | 3,872,000 | -279,000 | 3,593,000 | n/a |
