Nutanix, Inc. NTNX shares continued to soar Thursday after a stronger-than-expected quarter and more confident guidance, but much of the sell-side remained cautious as it transitions from a hardware business to one selling software subscriptions.
The company reported continued losses and lower sales, but came in above expectations and raised 2020 billings guidance, giving the stock a 30% boost.
Raymond James analyst Simon Leopold maintained his Market Perform rating on the stock.
JMP Securities analyst Erik Suppiger maintained a Market Perform rating and a $52 price target.
Bank of America analyst Wamsi Mohan reiterated a Buy rating and $35 price target on the stock.
KeyBanc’s Alex Kurtz maintained a $40 price target and Overweight rating on the stock.
Oppenheimer’s Ittai Kidron kept a Perform rating on Nutanix.
Overall, the business transition is dominating the Nutanix story and causing the caution.
Kidron noted the company’s full year top-line guidance implies a bigger revenue impact from the switch in models, which gives analysts pause.
“This reinforces that the transition, while a strategic positive in the long-run, adds near-term model uncertainty,” Kidron wrote in a note. Kidron also noted the guidance also implies a meaningful uptick in OpEx than prior consensus expectations, which, he said, raises the execution bar more.
“Taken together, we remain on the sidelines until Nutanix demonstrates it can derive value from the heavy investments it has and is expected to make to fulfill its vision,” Kidron wrote.
But several analysts said eventually, the move to an all-software model based on subscriptions will pay off. Leopold said Nutanix should return to double digit year-over-year growth in the second half of 2020, noting better-than-expected billings.
“We assume the Company's core headwinds in the near term are not solely due to competition, but organizational decisions around the North America franchise that will be addressed … starting in earnest in FY20,” Leopold wrote.
While Suppiger continues to rate the stock Market Perform, he noted management’s obvious new confidence with above-consensus guidance on billings and revenue, and said JMP does believe Nutanix is undervalued.
For Kurtz and Mohan, a big takeaway was that U.S. sales productivity increased quarter-over-quarter, which Kurtz called “a central issue for NTNX shares this year as new sales leadership continues to revamp teams and go-to-market strategies.”
Mohan raised full year 2020 revenue estimates from $1.33 billion to $1.37 billion while also boosting Fiscal 2021 revenues, though with lower EPS for both years on higher OpEx.
“We believe the quarter is a positive indicator that at least some of the lead generation issues are behind them,” Mohan wrote in a note.
The other big story around Nutanix was investors' enthusiastic reaction to the print. The stock was up 28.3% at publication time, trading at $25.16.
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