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Nutanix Turnaround Delayed By Demand Slowdown, Morgan Stanley Says In Downgrade

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Nutanix Turnaround Delayed By Demand Slowdown, Morgan Stanley Says In Downgrade

While poor results from storage companies indicate a market slowdown, recent Morgan Stanley channel checks highlight stiffening competition.

Given this backdrop, the turnaround at Nutanix Inc (NASDAQ: NTNX) could be delayed by two to three quarters, the sell-side firm said in a Tuesday downgrade note. 

The Analyst

Katy Huberty downgraded Nutanix from Overweight to Equal-Weight and reduced the price target from $53 to $37.

The Thesis

Although Nutanix's Essentials and Enterprise software offerings are differentiated from its storage peers and face a clearer TAM expansion opportunity, the cyclical slowdown of demand and competition from Dell Technologies Inc (NYSE: DELL) suggests a full recovery could take several quarters, Huberty said in the downgrade note. (See her track record here.) 

Enterprise hardware peers Pure Storage Inc (NYSE: PSTG), NetApp Inc. (NASDAQ: NTAP) and Hewlett Packard Enterprise Co (NYSE: HPE) missed on April quarter revenue, while their full-year revenue estimates have been lowered by 2-5 percent, the analyst said. This suggests risk to Nutanix's outlook, she said. 

Following a channel call hosted by Morgan Stanley, Huberty said competition seems to be a bigger issue than was earlier believed, adding that rising competition and slowing market growth are concerns.

Morgan Stanley reduced its calendar 2019 revenue estimate for Nutanix from $1.47 billion to $1.414 billion to reflect normal July quarter seasonality.

Price Action

Nutanix shares were down 10.6 percent at $31.41 at the close Tuesday. 

Related Links:

Jefferies: Reward Potential In Nutanix Outweighs The Risk

Analysts React To Nutanix's Broad Pipeline, Target Delay

Latest Ratings for NTNX

DateFirmActionFromTo
Aug 2019ReiteratesBuy
May 2019MaintainsEqual-Weight
May 2019ReiteratesBuy

View More Analyst Ratings for NTNX
View the Latest Analyst Ratings

Posted-In: Katy Huberty Morgan StanleyAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

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