Tech stock VMware, Inc. (NYSE: VMW) is broadly higher today on the heels of an upbeat note from Goldman Sachs. VMW was added to the brokerage firm's Conviction Buy list, with Goldman noting an expected boost in sales. The firm also thinks that VMW is better-positioned than many of its competitors to ride out the economic recession.
In addition to the Conviction Buy nod, Goldman also hiked its price target on VMW to $29, representing a premium of 22.8% to the equity's Tuesday closing price. The stock could attract additional price-target increases during the short term, as Thomson Reuters pegs its average 12-month target from analysts as $23.31 -- a modest discount to yesterday's close.
On the charts, VMW is extending its trek higher along support from its 10-day and 20-day moving averages. These two trendlines have lifted the stock since early March. If the shares can hang onto their positive momentum through Friday, VMW could close its first week ever on the north side of resistance from its 32-week moving average.
However, a technical obstacle looms in the form of the 26-to-27 neighborhood. This region has rejected the equity's rally attempts on numerous occasions throughout 2009, and could once again act as a roadblock.
Many on Wall Street are betting against a continued rally in VMW, as short interest accounts for a respectable 13.2% of the stock's float. This represents an increase of 3.8% from the previous reporting period.
Some of these bearish bettors seem to be spooked by the equity's recent trek higher, though, as call volume has accelerated in step with short interest during the past couple of weeks. During the past 10 days, traders on the International Securities Exchange (ISE) have bought to open an average of two calls for every put.
At last check, VMW was trading fractionally above the 25 level, which is home to peak call open interest of 7,400 contracts in the front-month series.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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