Nutanix Shares Surge on Back of Another Strong Quarter; Ittai Kidron Boosts Price Target

Nutanix receives a bullish report from Oppenheimer's Ittai Kidron based on the company's strong earnings and outlook.

Nutanix Inc. (NASDAQ:NTNX) shares are rallying nearly 8% in Friday’s trading session on a better-than-expected quarterly report and a projection for revenue this quarter comfortably ahead of expectations.

Specifically, the enterprise technology vendor reported a fiscal first-quarter loss of 16 cents a share on revenues of $275.6 million, beating the Street’s estimates of $0.26 and $266.9 million, respectively. For F2Q, Nutanix forecasts an adjusted loss of 22 cents to 20 cents a share on revenues of $280 million to $285 million, versus the Street’s expectations of 25 cents loss a share on revenues of $282 million.

In reaction, Oppenheimer analyst Ittai Kidron raised his price target on NTNX to $40 (from $34), while reiterating an Outperform rating on the stock. (To watch Kidron’s track record, click here)

Kidron commented, “Nutanix delivered a strong quarter/outlook, but the highlight was the start of its shift to a software model. While some transition-related volatility is likely (Street models, go-to-market/sales adjustments, product evolution, etc.), we’re bullish on the ultimate transformation, seeing multiple growth levers (sales force expansion/productivity gains, increased partner/channel leverage, better cloud/ service opportunities..) with less go-to-market friction and margin uncertainty.”

“Stronger margins, large-deal momentum (15 >$2M deals booked), and Federal strength were bright spots, though the clear highlight was management’s commitment to a software-focused model going forward. We’re bullish on the transition and look forward to a large gross margin boost over time (potentially >80%), more straight forward go-to-market efforts (less channel conflict, cleaner partner relationships), and a stronger path to fully leverage cloud service opportunities (starting with Xi in mid-2018). We’re adjusting estimates noting strong business dynamics, but incorporating the top-line pressure from lost hardware pass-through revenue,” the analyst elaborated.

Kidron is not the only fans of Nutanix on Wall Street, as TipRanks analytics exhibit NTNX as a Strong Buy. Based on 15 analysts polled in the last 3 months, 13 rate Buy ratings on Nutanix stock while 2 maintain a Hold. However, the 12-month average price target stands at $37.08, which implies only a modest upside for shares. 

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