What To Watch For In The Nutanix Q1 Print

As Nutanix Inc NTNX's first quarter reporting date draws near, sell-side analysts have been voicing their opinion on what to expect from the hyperconvergence infrastructure vendor.

The company is scheduled to report its fiscal first quarter 2018 results after the market close Thursday, Nov. 30.

The Analyst

KeyBanc Capital Markets analyst Alex Kurtz previewed the results and outlined a few key factors to watch for Thursday. The analyst maintained his Overweight rating and $32 price target for the shares of the company.

The Thesis

The first quarter guidance for 6 percent sequential revenue growth compared to 17.5 percent growth for the first quarter of 2017 and 35.7 percent growth for the same period in 2016 may be conservative, Kurtz said in a Tuesday note. (See Kurtz' track record here.) 

This is especially true as the demand environment stabilizes in the U.S. and Europe, Middle East and Africa, Kurtz said.   

"Our discussions with Nutanix partners during the quarter continue to highlight the steady progress of its Global 2000 customer focus, stable Dell partnership and international expansion," the analyst said.

Nutanix' U.S. federal activity, excluding classified transactions, was solid in Q1, Kurtz said, citing a proprietary KeyBanc analysis. 

Kurtz outlined key factors to watch:

• DRAM pricing and its impact on margins: DRAM costs, though having stabilized over the quarter, reaccelerated over the past month, Kurts szaid. Based on commentary from competition, the analyst said DRAM supply constraints are beginning to subside. He estimates product gross margin of 60.5 percent compared to 62.6 percent in the fourth quarter.

• Transition to software-only model: The analyst said the plan to transition to an "all-software" model in the medium- to longer-term from the current 17-percent reliance on software could come up for discussion on the earnings call.

• Execution within the Global 2000.

The Price Action

Nutanix shares are up over 30 percent in the year-to-date period.

Related Links:

What JPMorgan Is Watching For In The Nutanix Q1 Report

A Nutanix Bull Explains What The Street May Be Misunderstanding