VMware (VMW) shares are lower Tuesday morning after a lukewarm initial report on the company from Goldman Sachs analyst David Bailey, who started the company with a Neutral rating and a $40 price target.

“As a leader in server virtualization, VMware is fundamentally one of the most compelling names in technology,” he writes. “That said, with its growth rate coming down substantially and competition beginning to show up in the marketplace, it is difficult to argue that VMware’s valuation - already at a premium to its comparables - should expand over the intermediate term.”

VMW Tuesday is down 89 cents, or 2.5%, to $34.87.