Barclays Says It's 'Still Confident' In VMware; Here's Why

In a report published Wednesday, Barclays analysts Raimo Lenschow and Saket Kalia commented on VMware, Inc. (NYSE: VMW)'s recently reported earnings.

While the quarter was pretty much in-line with consensus, “consistent with other large cap names, VMware's FY15 outlook was meaningfully impacted by the strengthening of the US dollar (5% headwind to license, 3% to total revenue growth in FY15)," they wrote.

Related Link: VMware Reports Better-Than-Expected Earnings, Share Buyback

Despite the lower guidance for fiscal 2015, the analysts are still confident in VMware’s strategy. Normalizing for FX and “the negative effect of recognizing less revenue upfront due to the subscription model, […] as well as the cash flow headwinds, we [the analysts] believe VMware can still sustain mid-teens growth and outperform on margins," they add.

With shares currently trading at ~11x CY16 EV/FCF, which is compelling in Lenschow and Kalia’s view, the firm maintains an Overweight rating and a $100 price target on the stock.

The report points out a couple other positives in VMware.

Namely: An impressive product diversification and “balanced results across geographies.” Regarding the latter, analysts highlight “improved execution in Southern Europe, Germany, Greater China and Japan...in addition to a stable domestic market.

“We believe," they conclude, that "VMware has been somewhat shielded from macro factors in emerging markets due to lower adoption of server virtualization, which we believe is helping shore up results when coupled with a more comprehensive product portfolio.”