Nutanix Positioned At The Sweet Spot, Likely To Remain A Market Leader

Stand-Out Quarterly Performance

Analyst Ittai Kidron noted that the company's first quarterly results as a public company revealed sales and bottom-line results trumping estimates. The analyst noted broad-based sales strength, including new customer adds, good large enterprise momentum, gains from its Dell/EMC partnership and a stronger-than-expected federal contribution.

• 705 new customers.
• Positive operating cash flow.
• Healthy balance sheet.
• Extended Dell OEM agreement.
• Positive software trends.
• Stronger than expected federal business.
• Very large storage/server TAM.
• PernixData and Calm.io acquisitions.

• New hyperconverged solutions offering competitive environment over time.
• Managing Dell/EMC partnership/competitive threat.
• Cloud risk/opportunity.
• Normalizing billings/revenue ratio.
• No gross margin upside.
• Macro uncertainty.
• VC exposure.

Positive FCF Target Intact Despite Sales Investment

The firm also noted the company is vigorously adding sales resources, which is reflective of a still high amount of untapped sales capacity. Notwithstanding the investment, the firm noted that the company continues to expect positive free cash flow by the end of the calendar year 2017.

Raising Estimates

Citing the quarterly results and the strong outlook, Oppenheimer raised its estimates. The firm believes the company can maintain its hyperconverged leadership position due to its aggressive investment in technology and sales channels.

Oppenheimer views the near term as encouraging, with the management balancing investment in sales expansion, product stability, gross margin stability and technology/product, with longer than financial goals such as progressing toward is positive free cash flow target by the end of 2017.

Oppenheimer maintains its Outperform rating on the shares of the company and it has a $38 price target for the shares.

At time of writing, shares of Nutanix were sliding 3.55 percent to $32.88.