Last night, VMware, Inc. (NYSE:VMW) reported third-quarter adjusted earnings of $1.34 per share on $1.98 billion in revenue. This came in above the consensus forecast for a per-share profit of $1.27 on $1.96 billion in revenue. The virtualization firm also said licensing revenue came in at a stronger-than-expected $785 million.
The results were met with an onslaught of upbeat analyst attention. BMO, for instance, raised its rating on VMW stock to "outperform" from "market perform," and joined no fewer than 12 other brokerage firms in boosting their price targets on the security. The most optimistic outlook came from Stifel,which raised its VMW target price to $152 from $150 -- representing expected upside of 26.6% to last night's close at $120.11.
In fact, the highest VMW shares have ever traded is $127.60, tagged this past Monday -- before Wednesday's tech stock selloff. Nevertheless, the equity found a foothold atop its rising 40-day moving average during this mid-week retreat, a trendline that's guided VMware higher for most of the past two years. Today, the stock is up 2.4% to trade at $122.96 -- not quite the reaction the options market was pricing in -- widening its year-to-date gain to 53%.
A bigger bounce by VMW stock could spark a short-covering rally. Short interest edged up in the most recent reporting period to 23.33 million shares -- just shy of the mid-September record high of 26.04 million shares. This accounts for almost 28% of VMware's available float, or 12.9 times the stock's average daily pace of trading.