Nutanix (NTNX) Is a Worthwhile Investment at These Prices, Says Top Analyst

In the old days, companies needed to beat the operating performance metrics and Wall Street would reward them for that. That’s not enough these days — just look at Nutanix (NASDAQ:NTNX) stock. Investors expect management not only needs to beat revenues and earnings, but they also demand that they guide higher than expected. Otherwise, they sell the stock on the headline. This is what happened yet again to shares of Nutanix last night and this afternoon. The hyper-converged system maker beat on the top and bottom lines, but the fiscal first-quarter guidance was soft. The stock is falling 5% on the headline, but therein lies the opportunity.

Oppenheimer’s top analyst Ittai Kidron believes the company has effectively completed a successful transition to a software-driven model. While the analyst was too conservative on his OpEx assumptions, he remains bullish on the long-term opportunity ahead as Nutanix’s TAM/product portfolio expands and strengthens the company’s value proposition with customers.

Kidron wrote, “Nutanix reported another solid qtr. with sales/billings ahead of expectations, encouraging large deal momentum, and faster-than-expected progress with its software transition (software/support now ~88% of total rev.). The transition has gone well and in our opinion strengthened Nutanix’s positioning/value proposition with customers. While the fast pace is negatively impacting 1Q revenue guidance (due to a lower hardware contribution), GM is also delivering the expected expansion (1Q guidance of 78-79%) and the LT sales outlook is unchanged. We continue to believe that Nutanix’s vision and product road-map are differentiated and support a long runway of high growth. Management’s investing accordingly (and we’re raising OpEx significantly), though some investors could take a more cautious view as some investment areas take time to show results. We remain buyers.”

Net net, Kidron reiterates an Outperform rating on Nutanix shares, with a price target of $70, which represents a potential upside of 21% from where the stock is currently trading. (See Stock Recommendations from Scott Devitt)

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Ittai Kidron is a 5-star analyst with a yearly average return of 26.9% and a 68% success rate. Kidron has a 90.1% average return when recommending NTNX, and is ranked #37 out of 4874 analysts.

Wall Street’s confidence on the tech giant speaks for itself; NTNX has received a whopping 19 Buy ratings in the last 12 months versus only 3 Hold ratings. With a return potential of nearly 8%, the stock’s consensus target price stands at $62.22. (See NTNX’s price targets and analyst ratings on TipRanks.)


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