VMW – Market expectations are for Uniform ROA to compress, but management is confident about product leadership and demand

• VMWare, Inc. (VMW) currently trades above corporate and recent averages relative to Uniform earnings, with a 27.8x Uniform P/E (Fwd. V/E’).
• Even at these levels, markets are pricing in expectations for Uniform ROA to compress to 14%, accompanied by 7% Uniform asset growth.
• Meanwhile, analysts expect Uniform ROA to fade to 12% in 2023, accompanied by 7% Uniform asset growth.
• If sustained going forward, these levels would imply a stock price closer to $94, representing approximately 18% equity downside for the firm.
• However, the firm’s most recent earnings call suggests management is confident about product leadership and demand.