EMC: Bernstein Downgrades On Valuation, Macro Risks
Bernstein Research analyst Toni Sacconaghi today cut his rating on EMC to Market Perform from Outperform. He retains his $19.50 price target.
Sacconaghi offered three primary reasons for the downgrade.
- He thinks the stock is fairly valued at current levels. Sacconaghi says the stock looks cheap on a sum-of-the-parts basis, given the company’s large stake in VMware (VMW), but cautions that “it is not a slam dunk that the company will successfully monetize its ownership stake.” If VMW were spun off, he writes, “the large increase in its float could pressure the stock,” given that the valuation is supported partly by a scarcity premium that would be eliminated.
- Sacconaghi also is wary on IT spending, and notes that the company has lower recurring revenue then some other companies he covers, while also having relatively high exposure to the financial sector.
- And finally, he is concerned that the VMware valuation is too high, “in the face of rising competitive intensity and potential price pressure in the second half.” Sacconaghi sees potential headwinds for VMW, including the the second-half shipment of Microsoft’s (MSFT) Hyper V virtualization software, intensifying price competition from both Microsoft and Citrix (CTXS) and the lack of a significant new product cycle in FY 2008.
EMC today is down 43 cents, or 2.4%, to $17.54. VMW is down $1.81, or 2.6%, to $67.49
Come on. EMC is a great company with sound financials. As the Internet grows, so grows the need for more storage. They will rally back.
So called analyst issued a target of $19.50 and says that shares are fairly valued. Huh. First, the price is still below $19.50. Second, the companies financial picture has only improved over last year. Looks like he must be short. Another idiotic analyst who does not know better.
Toni? Toni? Unlocked iPhone? Unlocked iPhone? Eric? Eric?
Well given how well microsoft’s operating systems work I am sure VMWARE is laughing at the thought of Mr. Softee being considered a threat. Would you buy software from Microsoft? This is my last computer with their crap. All their stuff does is crash or lock up.
Analysts have their own reasons for upgrading or downgrading a stock…don’t forget, the nature of their business has always been shady. VMWare is going to be huge!!! I’m looking at the long term picture and the sky is the limit for them.
EMC stock use to be over $140 during it’s heydey. Since Tucci’s arrival it has done exceptionally poor. Prior to EMC,he directed the financial and operations of Wang Global during six years as its Chairman and CEO, and ran that place into History with his software penchant. Most analysts have said in the past that the investment and training in software firms and staying on top of it is extremely difficult.
Except for perhaps VMWare of late (there will be another VMWare) there has been little to crow about except the “fat cats” that control EMC keep getting huge payouts while the investors get what’s leftover.
Bring back the wild west shootouts of EMC when we had yet to make our 1st billion… Until then be happy it’s still at 17.06!
Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields.
