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Nutanix Shares Whipsaw On Poor Earnings, Positive Analysts

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Nutanix Shares Whipsaw On Poor Earnings, Positive Analysts

Nutanix Inc (NASDAQ: NTNX) shares plummeted over 7 percent at one point during Thursday’s after-hours session following a third-quarter earnings miss. The company announced Q4 EPS guidance below consensus estimates despite sales guidance that beat expectations. 

Shares of Nutanix were moving higher during the first hour of trading Friday, but pulled back to the $53 handle by late morning.

Poor Earnings Excused By Faster Hiring

Nutanix onboarded 480 employees during the quarter, with over 60 in sales. This hiring raised operating expenses, pulling earnings below consensus. As sales still exceeded estimates, analysts were largely willing to look the other way.

Bank of America Merrill Lynch's Wamsi Mohan had been anticipating accelerated hiring for the past two quarters and sees management’s focus on sales as a positive in the long-term.

Stifel and JMP Securities also seemed to excuse the earnings miss and low guidance on the same grounds. “The large increase in billings more than offsets the higher costs,” JMP analyst Erik Suppiger said in a note.

‘Changing The Wings Of A Plane While Flying At 35,000 Feet’

That’s what Nutanix CEO Dheeraj Pandey told analysts during the post-earnings conference call.

The company has been working to shift its revenue mix toward a software-centric model — which makes its 40-percent annual revenue growth and 50-percent billings growth all the more impressive to BTIG analyst Edward Parker.

Of the company’s top four deals over $5 million, three were software-only, Parker said. Morgan Stanley’s Katy Huberty was also surprised by how quickly Nutanix has been able to grow its software business.

Huberty added that, should her long-term bull case play out, Nutanix’s penetration into the data storage and server market will be on par with that of VMware, Inc. (NYSE: VMW).

“We continue to believe Nutanix remains in the earliest days of its journey,” said Stifel analyst Brad Reback, summing up Wall Street’s response.

The Ratings

  • Bank of America reiterated a Buy rating and $63 price target.
  • BTIG reiterated a Buy rating and $60 price target.
  • Morgan Stanley reiterated an Equal-Weight rating and raised its price target from $52 to $55.
  • Stifel reiterated a Buy rating and $64 price target.
  • JMP reiterated a Market Outperform rating and $60 price target.

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Latest Ratings for NTNX

DateFirmActionFromTo
Dec 2020Morgan StanleyMaintainsEqual-Weight
Dec 2020OppenheimerUpgradesPerformOutperform
Nov 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for NTNX
View the Latest Analyst Ratings

 

Related Articles (VMW + NTNX)

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INTB of A SecuritiesUpgrades40.0
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