Nutanix Inc (NTNX) Sharpens HCI Leadership Position Even as Competition Grows: Oppenheimer

Nutanix posts record high 45% rise in software sales.


Nutanix Inc (NASDAQ:NTNX) pulled off a strong second fiscal quarter showing resilience against continuously rising DRAM prices, proving that the cloud computing developer can stay at the forefront of the HCI pack even as the competition hardens. Over the quarter, the company increased its clientele by 14.2% quarter over quarter and 87.1% year over year, attracting 559 internationally and 6,492 in North America with the highest number of large deals to date. Moreover, guidance was promising as ever with sales momentum expected to flow into the first fiscal quarter of 2018.

Analyst Ittai Kidron of Oppenheimer believes “the DRAM headwind will eventually subside providing a sales/margin boost, but in the meantime, Nutanix’s showing that its growing software streams (multiple OEM partners, multiple purchasing options, multiple products) can limit further margin pressure while being a key growth driver/value-add.” Furthermore, underscoring how Nutanix is successfully offsetting an increase in DRAM prices, as evidence of the quarter’s record high 45% growth in software sales, the analyst notes that “Equally encouraging is the growing breadth/diversification of its software exposure including multiple distribution paths (Dell/EMC, Lenovo, IBM, HPE, Cisco), product options (OS/support upgrades, Calm, Xi Cloud, AHV valueadd), and consumption options.”

Nutanix beat consensus across the broad in the second fiscal quarter. The company outclassed the Street’s revenue prediction of $218.0 million by garnering $226.1 million, posted a loss per share of $0.33 against the Street’s forecast of $0.38, all while outperforming the Street’s billing projections of $270.4 million with a $289.2 million beat. Worthy of note, company guidance indicates an expectation for a continued push forward in the first fiscal quarter of 2018 with revenue of $240 million vs. the Street’s prediction of $231.2 million, while loss per share outlook falls in line with the Street at $0.37.

Spotting even more gains ahead for the tech company, Kidron opines “Nutanix delivered another strong quarter driven by improved overall execution, record large-deal activity, and international gains. We’re positive and believe there are multiple levers to drive further upside including sales force expansion/productivity gains, growing software opportunities, partner leverage, and an eventual lift (sales/margins) when DRAM headwinds subside.”

As such, the analyst reiterates an Outperform rating on NTNX with a price target of $34.00 representing a just under 57% rise from where the shares last closed. (To watch Kidron’s track record, click here)

TipRanks analytics exhibits NTNX as a Strong Buy. Out of 13 analysts polled by TipRanks in the last 3 months, 10 are bullish, while 3 are sidelined on Nutanix stock. With a potential upside of near 37%, the stock’s consensus target price stands at $30.09.