Market Overview

Nimble Storage In Recovery Mode After Second Consecutive Quarterly Revenue Beat

Nimble Storage In Recovery Mode After Second Consecutive Quarterly Revenue Beat

Morgan Stanley said Nimble Storage Inc (NYSE: NMBL)'s second quarterly revenue beat in a row puts the company on the path to revenue growth acceleration and a return to operating leverage amid strong uptake of all-flash arrays (AFAs).

Nimble reported lower-than-expected loss of $0.19 for the second quarter, as the $97.1 million revenue topped the Street's view of $94.7 million. The company sees third quarter loss per share at $0.17–$0.19 versus estimates of $0.17 loss and revenues of $100 million –$103 million versus consensus estimate of $100.9 million.

"We believe NMBL sould trade more in-line with Pure Storage Inc (NYSE: PSTG) rather than NetApp Inc. (NASDAQ: NTAP) where sales are declining which drives our $16PT, 2.6x CY17 EV/Sales," analyst Katy Huberty wrote in a note.

Guidance, Analyst Expectations

Nimble's guidance implies revenue growth accelerates to 26 percent in October, from 21 percent the prior two quarters, on the back of channel and direct sales investments and a broader product portfolio.

Related Link: Goldman Removes NetApp From Conviction Sell List, Upgrades

Huberty noted that the AFAs, launched in March, already account for 17 percent of product bookings and generate nearly double the average deal size. Further, the large enterprise grew 37 percent and uptick in gross margins highlights the company's strong competitive positioning with AFA.

"We'd also point to rising inventory of customer evaluation units (inventory up 17 percent Q/Q, highest since July 2014) as a signal of a strong large deal pipeline heading into F2H17," Huberty continued.

Meanwhile, after three quarters of operating margin deterioration, the company expects improvement in operating margin in the January quarter on increased large deals, improved channel leverage and repeat bookings.

"We model revenue growth acceleration in F3Q and F4Q with NMBL maintaining a similar, 28 percent Y/Y, growth rate in F4Q17 and FY18," Huberty added.

Huberty maintains her Overweight rating on Nimble, but cut the price target to $16 from $18.

At time of writing, shares of Nimble were up 2.38 percent on the day, trading at $9.03.

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Latest Ratings for NMBL

Mar 2017NeedhamDowngradesBuyHold
Mar 2017Morgan StanleyDowngradesOverweightEqual-Weight
Mar 2017BMO CapitalDowngradesOutperformMarket Perform

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