Nutanix's Q3 Beat 'Solid,' Guidance 'Robust'

Nutanix IncNTNXthird-quarter earnings report came in better than expected.

Analyst's Take On Q3

Following the earnings report, Credit Suisse's Kulbinder Garcha maintains an Outperform rating on Nutanix's stock with an unchanged $38 price target after the company's earnings report was "solid." Specifically, the company reported an EPS of negative $0.42 per share on revenue of $192 million, which exceeded the $0.45 per share loss the analyst was expecting on revenue of $188 million. Perhaps more important, Garcha noted that heading into the earnings report some investors and analysts had doubts relating to Nutanix's growth and margins. But the third quarter report suggests that the company's business, addressable market and execution "remain intact" and reinforced the analyst's prior bullish stance.

"We believe a sizable TAM, an effective sales motion, and a well-considered business model, that relies upon software IP, should drive strong, sustained financial performance longer term," Garcha wrote.

'Robust' Guidance

In conjunction with Nutanix's earnings report, the company guided "robust" fiscal fourth quarter to grow 56 percent year over year at $217.5 million, supported by a 47 percent growth in billings at $234 million and a 102-percent growth in deferred revenue.

Garcha also noted that beyond the financial metrics and outlook, Nutanix has experienced "strong" customer growth, which rose 98 percent year-over-year and now stands at 6,172, of which 521 are a Global 2000 company. As such, the analyst sees multiple drivers available to continue growing sales, including the expansion of its international business, which accounts for 38 percent of bookings.

Bottom line, Nutanix's stock is trading at a 3x multiple on EV/revenue, which is a discount to the next generation datacenter group that trades at 5x, which implies shares have plenty of room to grow moving forward.

At time of publication, shares of Nutanix were up 14.63 percent at $20.11.

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