Susquehanna Downgrades Nutanix, Projects Profitability — In 2022

Nutanix Inc. NTNX was hit with a downgrade Monday, with Susquehanna citing increased competition and a hazy reception to its subscription model.

The Analyst

Susquehanna analyst Mehdi Hosseini downgraded Nutanix from Neutral to Negative and lowered the price target from $55 to $33.

The Thesis

Nutanix is well-positioned with a model transformation that has driven strong growth, Hosseini said in the note. (See his track record here.) 

“Multiple expansion of the past year has reflected this, though [the] BE goalpost is pushed out. In our view, the next phase of transformation — vertical integration to become a second source to VMWare, Inc. VMW — will take longer than expected, while the more opex/more growth approach may not yield enough growth acceleration to become profitable anytime soon.”

Hosseini praised the software company for altering its course since the initial public offering, but said its fundamentals should prove challenging going forward due to the following reasons: 

• The company’s original equipment manufacturer relationships becoming less impactful.
• An unclear reception for the subscription model as Nutanix competes with peer license models. 
• An expected Dell initial public offering, which should block entry for any new competitor.
• “Don't count Microsoft Corporation MSFT out of the HCI game, and we would not be surprised to see a more concerted push around Storage Spaces Direct (as part of Windows 19 refresh).”

Price Action

Nutanix shares were down 7.64 percent at $42.90 at the time of publication Monday. 

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