VMware posted third-quarter earnings and revenue that both beat analysts' estimates
The shares of software concern VMware, Inc. (NYSE:VMW) are up 2.3% to trade at $168.75 this morning, after the firm posted third-quarter profits of $1.49 per share, and revenue of $2.46 billion -- both of which beat analysts' estimates. VMware cited strengthening sales for its Hybrid Cloud subscription and SaaS.
Analysts have been flocking to the stock as a result. At least six members of the brokerage bunch have already lifted their price targets, including RBC, which hiked its estimate to $200 from $190. The consensus 12-month target price of $179.50 is still at a slight premium to current levels -- sitting just south of the equity's post-bear gap highs. There's still room for bull notes to add tailwinds on the charts, though, since six of the 18 in coverage still call it a "hold" or worse.
In fact, since VMW gapped lower in late May, this aforementioned peak near the $180 region has served as a ceiling on the charts. The 80-day moving average also thwarted several attempts to rally earlier in the year, but the equity was able to slice through resistance here in late October. Now, the stock is running up recent resistance at the $170 level, which happens to coincide with its 200-day moving average.
Despite a roughly 20.3% year-to-date gain, sentiment in the options pits was quite bullish ahead of earnings. During the last 10 days, 1.24 puts were bought for every call on the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 75th percentile of its annual range, too, implying a bigger appetite for bearish bets of late.
And while short interest has started to unwind in recent weeks -- down almost 6% in the last reporting period -- the 7.73 million shares sold short still represent a solid 10.2% of the stock's available float, and would take over a week to cover at VMW's average pace of trading. Should these bears continue to hit the exits, a short squeeze could propel the stock even higher.