Investors should buy VMware because its partnerships with cloud providers will drive growth, according to Robert W. Baird, which raised its rating on the company to outperform from neutral.
VMware will report first-quarter earnings on Thursday after the market close.
"The recent partnership between VMware and AWS [Amazon Web Services] has been received with great positivity and excitement, according to our channel work," analyst Jayson Noland wrote in a note to clients Wednesday. "Naturally, a co-development between the respective leaders in private and public clouds should offer an unparalleled level of seamlessness in hybrid cloud mobility, which to date remains one of the largest challenges to enterprise cloud deployment."
VMware and Amazon announced a strategic partnership in October.
Noland raised his VMware price target to $115 from $90, representing 19 percent upside from Tuesday's close.
The analyst cited how Amazon will create dedicated solutions for VMware, which will enable the company's customers to use old applications on AWS without "rewriting, retooling and retraining." He also noted VMware's partnership cloud deals with Microsoft Azure and IBM.
"We are positive on VMware's strategic shift to partner, not compete with the public cloud," he wrote. "VMware is better strategically positioned now than in years, in our opinion."
A VMware spokesperson declined to comment for this story.
— CNBC's Michael Bloom contributed to this story.