Why VMware Is A Solid Choice For Growth Investors In 2018

On Mar 16, VMware Inc. (NYSE:VMW) was upgraded to Zacks Rank #1 (Strong Buy).

The upgrade reflects positive impact from the impressive fourth-quarter fiscal 2018 results. Non-GAAP earnings beat the Zacks Consensus Estimate by a nickel and increased 17.5% from the year-ago quarter.

Revenues of $2.31 billion also topped the consensus mark of $2.26 billion and increased 13.6% on a year-over-year basis. The year-over-year growth was driven by robust performance of its product offerings like NSX and vSAN.

Notably, VMware beat the Zacks Consensus Estimate for earnings in all of the trailing four quarters. The top line also surpassed the consensus mark in all of the trailing four quarters.

Expanding Portfolio, Partnerships: Key Catalysts

We believe, expanding product portfolio, partnerships with the likes of IBM (NYSE:IBM), Amazon (NASDAQ:AMZN) , Pivotal and Alphabet (NASDAQ:GOOGL), along with continuing enterprise deal wins, will continue to drive growth.

VMware has collaborated with Amazon Web Services (AWS) to offer an integrated hybrid cloud solution, functioning much like a software-defined data center (SDDC). Apart from the internal servers, this contract enables users to run VMware software (vSphere, Virtual SAN and NSX) on the Amazon cloud.

VMware recently expanded VMware Cloud on AWS to Europe. The expansion will allow European users to access a broad range of innovative AWS services including compute, databases, analytics, Internet of Things (IoT), security, mobile, application services and more.

VMware also has a similar deal with IBM, which enables the company’s VSphere customers to initiate workloads on the IBM SoftLayer cloud infrastructure.

Further, the company recently expanded its portfolio of cloud services that now include VMware Hybrid Cloud Extension Service for Private Cloud, Wavefront by VMware Service, Log Intelligence Service and Cost Insight Service.

These factors are expected to drive VMware’s earnings growth in fiscal 2019. The Zacks Consensus Estimate for fiscal 2019 earnings has increased 6.8% to $5.95 over the last 30-days.

A Solid Pick for Growth Focus Investors

VMware sports a Growth Style Score of B.

Our research shows that stocks with Growth Style Scores of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer best investment opportunities in the growth investing space.

Other Stocks

Investors can also consider NVIDIA (NASDAQ:NVDA) and Cognizant Technology Solutions (NASDAQ:CTSH) from the broader technology sector. The stocks sport similar Zacks Rank as VMware. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for NVIDIA and Cognizant are currently pegged at 12.26% and 12.60%, respectively.

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