Longbow's Wittine Upgrades Nimble Storage, Likes Recurring Revenue Model

• Nimble Storage Inc NMBL shares are down 21 percent in the last three months, after hitting $30 on June 24.
• Longbow’s Joe Wittine upgraded the rating on the company from Neutral to Buy, while establishing a price target of $32.
• Nimble Storage’s ability to sustain its current growth trajectory and the recent pullback in shares make the company’s stock attractive, Wittine stated.

Analyst Joe Wittine expects Nimble Storage to be able to sustain its current growth trajectory of adding over $100 million in sales annually, supported by its “Land & Expand” metrics and customer mix. He added that the recent pullback in the company’s shares has created an attractive entry point.

Wittine believes that Nimble Storage’s strength lies in its ability to build a substantial recurring revenue base due to tis “stickiness and the frequency of customer repurchases.” The Longbow report added that the company’s customers on an average make repeat purchases “totaling 1.6x the original purchase in the subsequent three years.”

The company is expected to exit CY15/FY16 with recurring revenues of ~$280 million and CY16/FY17 with ~$400 million worth or recurring revenues. Wittine noted that these recurring revenues, along with 600-700 new customers added every quarter, are adequate to meet market expectations without a significant rise in its average deal sizes.

Nimble Storage’s performance is largely disassociated with the concerns related to China and macro IT budgets, the report mentioned.