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In a wide-ranging research paper on Tuesday, based on hybrid IT, a Morgan Stanley analyst said the firm believes Nutanix (NASDAQ:NTNX), Pure Storage, Inc. (NYSE:PSTG), F5 Networks (NASDAQ:FFIV), Palo Alto Networks (NASDAQ:PANW) are best positioned to take advantage of the $18bn infrastructure opportunity.
The analyst said that enterprises are heading toward a hybrid IT future, leveraging multiple public clouds and on-premise or colocated footprint.
On Nutanix, the analyst stated the company “trades in line with networking/hardware comparables at ~3x EV/23 sales given demand trends/supply going to track more with data center providers in the near term.” He added that the ACV transition story is masked in the near term by supply chain and macro risks.
On Pure Storage, the analyst explained that risks to the downside include faster public cloud shift limits on-prem spending, share loss from increasing competition from traditional & new vendors, new products failing to generate incremental revenue, and sales capacity failing to ramp & large enterprise deals.
Regarding F5 Inc, the analyst stated their valuation methodology is based on: “~18x FY23e EV/FCF, a meaningful discount to mature large-cap software peers on a growth adjusted basis given hardware to software transition challenges, but a premium to networking peers given software growth opportunities.”
Finally, on Palo Alto Networks, the analyst stated the risks to the downside are executive turnover potentially driving greater than expected sales disruption, slowing firewall refreshes could cause a greater than anticipated impact to PANW’s top line growth, and an increasingly competitive environment could necessitate additional S&M spending, limiting margin leverage.
