Cloud computing company Nutanix (NTNX) has seen its shares plunge nearly 40% year-to-date, as investors are not too pleased with the numbers the company is putting out.
Most recently, when the cloud computing software company released third-quarter earnings, its stock plunged 16% on one day. Though revenue and profit were both only slightly off estimates, guidance was none too pleasing for Wall Street. While the Street is expecting revenue of $333 million for the next quarter, management called for a low-end of $280 million, and a high of $310. Further, while analysts are expecting a per-share loss of $0.49, the company is calling for as low as $0.65.
However, even with the poor current and expected performance, William Blair analyst Jason Ader is bullish with an Outperform rating on the stock. (To watch Ader’s track record, click here)
While Nutanix started the year with a “six-month rough patch”, Ader says “VAR (value-added reseller) commentary points to the early stages of an upswing.” Specifically, commentators “note a solid pace to their Nutanix business in the July quarter with a growing number of seven-figure deals, an improving pipeline, and good distribution across commercial and public sector accounts and across workloads (including many mission-critical apps).” Expansion of its pipelines has been “supported by aggressive sales hiring at Nutanix and increasing sales coverage,” which the analyst sees as a positive for the future. Secondly, Ader says “HCI demand remains robust with the market still a two-horse race competitively (Nutanix and Dell/VMware).” While commentary says Dell has “no doubt…become stronger in the HCI space over the past year,” the analyst says “Nutanix continues to win its fair share of deals because of the quality of its HCI product and its category-leading brand.”
Aside from actual sales, Ader believes Nutanix’s “transition to a term-based licensing model has created near-term challenge…but will yield long-term benefits for” the company “respect to visibility/predictability, customer lifetime value, and sales leverage.” And while its stock is down big so far this year, the analyst says “valuation is compelling at an enterprise-value-to-sales multiple of 3.2 times our calendar 2020 estimates—which compares to the hybrid software/SaaS peer group median of 5.2 times.”
All in all, when it comes to Nutanix stock, many analysts are on board — even if its chart doesn’t show the positive sentiment. TipRanks analysis of 16 analyst ratings shows a Moderate Buy consensus, with 10 saying Buy, 5 recommending Hold and one suggesting Sell. The average price target among these analysts stand at $38.07, which represents nearly 47% upside from current levels.
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