VMware Stock Options Cheap After Earnings

There's room for more bull notes to VMW, too

Managing Editor
Mar 1, 2019 at 10:08 AM
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VMware, Inc. (NYSE:VMW) is a hot stock on Wall Street right now. The security is up 5.5% to trade at $181.25, and earlier nabbed a fresh record high of $183.41, after the virutalization name reported fourth-quarter earnings and revenue that exceeded analyst expectations. Six price-target hikes have already come in, including one to $203 from $196 at Jefferies, which said VMW's growth is "sustainable."

VMW closed out February with only three negative closes and a 13.7% gain. The shares have yet to post a weekly loss in 2019, and another weekly win this week will make it 10 in a row, the most on record. Plus, pullbacks like the equity saw yesterday -- which snapped a 13-day win streak -- have been contained by its 10-day moving average. Going back further, the stock is up 57% year-over-year. 

There could be room for more bull notes, too. Of the 22 brokerages covering VMW, nine rate it a "hold" or "strong sell," while its consensus 12-month price target of $178.80 is a discount to current trading levels. 

As discussed earlier this week, options traders had been showing bearish tendencies in recent weeks -- which could create tailwinds for the stock on an potential unwind. Now might be an attractive time to bet on VMware's next leg up with options, with the uncertainty of earnings out of the way. At last check, the equity's 30-day at-the-money implied volatility was perched at 26.7%, in the 11th annual percentile, meaning near-term options are relatively cheap at the moment. 

 

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