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While poor results from storage companies indicate a market slowdown, recent Morgan Stanley channel checks highlight stiffening competition.
Given this backdrop, the turnaround at Nutanix Inc (NASDAQ:NTNX) could be delayed by two to three quarters, the sell-side firm said in a Tuesday downgrade note.
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The Analyst
Katy Huberty downgraded Nutanix from Overweight to Equal-Weight and reduced the price target from $53 to $37.
The Thesis
Although Nutanix's Essentials and Enterprise software offerings are differentiated from its storage peers and face a clearer TAM expansion opportunity, the cyclical slowdown of demand and competition from Dell Technologies Inc (NYSE:DELL) suggests a full recovery could take several quarters, Huberty said in the downgrade note. (See her track record here.)
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Enterprise hardware peers Pure Storage Inc (NYSE:PSTG), NetApp Inc. (NASDAQ:NTAP) and Hewlett Packard Enterprise Co (NYSE:HPE) missed on April quarter revenue, while their full-year revenue estimates have been lowered by 2-5 percent, the analyst said. This suggests risk to Nutanix's outlook, she said.
Following a channel call hosted by Morgan Stanley, Huberty said competition seems to be a bigger issue than was earlier believed, adding that rising competition and slowing market growth are concerns.
Morgan Stanley reduced its calendar 2019 revenue estimate for Nutanix from $1.47 billion to $1.414 billion to reflect normal July quarter seasonality.
Price Action
Nutanix shares were down 10.6 percent at $31.41 at the close Tuesday.
Related Links:
Jefferies: Reward Potential In Nutanix Outweighs The Risk
Analysts React To Nutanix's Broad Pipeline, Target Delay
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.