Nutanix Inc (NASDAQ:NTNX) shares are climbing nearly 6% in Friday’s trading session, after the cloud software firm reported solid fiscal 2Q earnings ahead of expectations and provided encouraging guidance. Specifically, Nutanix posted adjusted loss of $0.14 per share and revenues of $286.7 million, beating consensus estimates for $0.20 and $283.2 million, respectively
Looking ahead, April quarter (F3Q18) midpoint revenue guidance is $278 million (up 35% y/y, down 3% q/q) that modestly beats the consensus estimate of $268 million.
In reaction, Maxim analyst Nehal Chokshi reiterates a Buy rating on Nutanix shares, while raising the price target to $54 (from $51), which implies an upside of 41% from current levels. (To watch Chokshi’s track record, click here)
Chokshi commented, “Given the strong results (F2Q18) and guidance (F3Q18), we are raising our FY18 revenue estimate by 5% to $1.14B (up 35% y/y), billings estimate by 11% to $1.37B (up 37% y/y) and our gross profit estimate by 4% to $767M (up 4% y/y). We are also raising our FY19 revenue, billings and gross profit estimate by a similar amount as we are for FY18 as we allow the upside to flow through. The results and guidance also imply sales productivity is trending ~300bps better than our prior expectation, but given the muted gross profit raise, we are only improving our DCF period sales productivity level from 37.5%, to 37%. The combination of the higher revenue estimate and slightly better sales productivity levels we assume from FY20 to FY29 result in our DCF 12-month price target increasing to $54, from $51. We utilize DCFs across all our hypergrowth names with the same mechanics, which includes ensuring change in deferred revenue goes to zero in the terminal period and a 15x multiple on our terminal period FCF estimate.”
Out of the 13 analysts polled by TipRanks (in the past 3 months), 9 rate Nutanix stock a Buy, 3 rate the stock a Hold and 1 recommends a Sell. With a return potential of nearly 14%, the stock’s consensus target price stands at $43.73.