Citing “fading tailwinds” from VMware enterprise licensing agreement renewal cycles, FBR Capital Markets & Co. has downgraded shares of the virtualization software kingpin from outperform to market perform.
The downgrade sent VMware shares sliding 3 percent, or $2.14, to $83.06 on Monday. The market perform rating lowers the FBR VMware shares’ price target to $90, down from $96.
Given “mixed checks” around VMware’s “all important” ELAs, FBR analysts Daniel Ives and James Moore lowered VMware sales and earnings estimates for both the second half of the current fiscal year and fiscal 2016.
“Overall, we believe VMware is in its ‘eighth inning’ in terms of VSphere penetration at the enterprise, which could limit top-line growth reacceleration, and while some investors are still holding out hope for a positive strategic move by EMC (e.g. spin-off of VMware) it appears to be a fleeting possibility as evidenced by [VMware corporate parent] EMC’s dogmatic view around VMware within the EMC federation,” wrote Ives and Moore in a research note.