Bullish Q3 Expectations Push Nutanix Shares Higher

Recent checks and discussions with value-added resellers indicate "broad adoption" of Nutanix's products within the midmarket and large enterprise which bodes well for the company's October quarter, Ader commented in a research report. The checks also indicate a "very strong" quarter for large deals, some of which are in the high seven-figure range. The discussions also suggest a "rising uptake and higher customer satisfaction" for the company's home-growth hypervisor (AHV), the analyst continued. This represents a key offering that is considered a differentiation versus competitors. "We believe that vendors like Nutanix are well positioned to benefit from customer imperatives around on-premises infrastructure modernization—with the goal being to achieve cloud-like simplicity and economics in their private data centers," the analyst also wrote. "Our VAR discussions bear this out, as the demand pendulum appears to be swinging toward emerging, best-of-breed vendors with more modern approaches and away from traditional, one-stop shop vendors that are often viewed to be out-of-step with the latest trends." Related Links: Nutanix Still Not Viewed As A Leader In Hybrid Cloud Services, But That Could Change Nutanix And The Upcoming Catalysts, A Software Story

Finally, Nutanix's desires to become an all-software business is a move could prove to be a move that is needed to eliminate the margin fluctuations that is inherent in hardware focused entities, the analyst concluded. By using a 6.0 times enterprise-value-to-sales multiple on a pro forma revenue estimate for calendar 2018 yields a valuation price of $34 per share.