Global 2000 Companies Will Be 'Core Driver' For Nutanix's $3B Billings Target, Says KeyBanc Analyst

Nutanix Inc NTNX said it has identified a path toward $3 billion in product and support billings in fiscal 2021 in an analyst day presentation Monday. This represents a growth rate of 40 percent from 2017 and prompted KeyBanc to turn incrementally bullish on the stock.

The Analyst

KeyBanc Capital Markets' Alex Kurtz maintains an Overweight rating on Nutanix's stock with a price target lifted from $52 to $61.

The Thesis

The $3-billion billings goal, which is not official guidance, was the "big headline" from Nutanix's presentation, Kurtz said in a Monday note. 

The cloud platform company's objective is mostly dependent on generating large deals, and the Global 2000 group will be a "core driver" of the revenue ramp, the analyst said. Nutanix is positioned to target the 2,000 companies, which account for a total addressable market of $75 billion; the cloud sector and systems management add another $15 billion to the TAM, Kurtz said. 

"Nutanix will begin supporting file protocols in the next software release, which will enable sales reps to target traditional NetApp Inc. NTAP and Dell/EMC file environments later this year," the analyst said. 

The introduction of Nutanix's "Calm" and "Prism" capabilities, servers and storage IaaS opens up a new opportunity with the introduction of Xi Cloud Services, Kurtz said. 

KeyBanc's revised price target of $61 implies an 8x EV/F19 revenue multiple, similar to that of competitors Splunk Inc SPLK and Palo Alto Networks Inc PANW during growth cycles where billings growth rates top 40 percent, the analyst said. 

Price Action

Shares of Nutanix hit a new all-time high of $53.67 Tuesday morning and were up by 2.12 percent at the time of publication. 

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