Morgan Stanley Believes VMW's Shares Will Rise In Absolute Terms Over Next 60 Days

In a “research tactical idea” report, Morgan Stanley said that it believed the share price of VMware, Inc. VMW “will rise in absolute terms over the next 60 days.” “This is because the stock has traded off recently, making short term valuation much more compelling,” Morgan Stanley writes. “The 15% pullback in the stock since its peak in January - lately due to overly negative sentiment on servers and risk from Japan - has created an attractive entry point for VMW, in our view. “We see 3 near term catalysts: 1) our early checks suggest that the co. should report solid Q1 results in April (projected around 4/19) with strong large deal activity; 2) VMW should benefit from better than normal visibility in Q1, with deferred license rev. at over 16% of our FY11 license forecast; and 3) Potentially upbeat commentary from mgmt. on traction with desktop virtualization and mgmt. tools would bode well for FY11. At 19x EV/CY12 FCF, valuation is compelling vs. sustainable mid-20s FCF growth.” VMware closed Tuesday at $80.18.