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Nutanix Inc. shares moved as much as 21.7% Tuesday morning, because that just seems to be what the company’s stock does after earnings right now.
Nutanix stock NTNX, +17.39% has moved by double-digit percentages after three previous earnings reports, and was headed for a similar swing Tuesday, trading as high as $34.99 after closing Monday at $28.75. Nutanix’s latest numbers didn’t totally blow estimates out of the water , but financial beats don’t seem to be the bar for Nutanix right now. Instead, investors are looking to Nutanix’s quarterly reports as referendums on the company’s pivot to becoming a software-focused business, and they liked what they saw of that transition in the latest numbers.
The company’s turnaround is “in full swing,” wrote William Blair analyst Jason Ader. “While there were signs of progress last quarter, our latest round of VAR [value-added reseller] checks showed a material jump in pipeline activity and enterprise wins, which we believe Nutanix’s first-quarter performance largely confirms. Despite an average 25% drop in backlog between the fourth and first quarters over the last three years, Nutanix noted that backlog at quarter-end was steady with the fourth quarter, indicating a new, more visible baseline in the business.”
He rates the stock at outperform.
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Oppenheimer’s Ittai Kidron also cheered the signs of progress at Nutanix. The company “has effectively completed its software transition and is making good progress with its subscription transition,” he wrote. “As expected, sales and product investment showed a substantial quarter-over-quarter increase, but we have improved confidence in management’s ability to leverage the firepower.”
Kidron has a perform rating on Nutanix shares.
Raymond James analyst Simon Leopold said the report prompted a “sigh of relief,” but he’s hesitant to jump on the bull train just yet. “Nutanix remains an evolving story; management would like investors to focus on annual contract value versus the prior total contract value as a better way to appreciate the subscription business. Although we see the logic, cash burn or generation remains important. We doubt Nutanix generates cash during any quarter of FY20, so we remain on the sidelines.”
He has a market perform rating on Nutanix’s stock.
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Others keyed in on Nutanix’s results relative to an unpredictable industry landscape. The company “sidestep[ped] datacenter carnage,” wrote JPMorgan’s Mark Murphy, who has a neutral rating and $35 target on the stock, up from $33 prior to the latest numbers. And Deutsche Bank’s Karl Keirstead argued that the lack of negative macroeconomic commentary from Nutanix and Palo Alto Networks Inc. PANW, -11.88% late Monday likely bodes well for VMware Inc. VMW, -1.16%, which is due to report after Tuesday’s closing bell. Keirstead rates the stock at hold with a new target of $20, up from $25 before the report.
Of the 21 analysts tracked by FactSet who cover Nutanix, 12 rate the stock a buy, eight call it a hold,a and one rates it at sell. The average price target listed is $39.33, 17% above current levels. At least 10 analysts boosted their targets after the report, according to FactSet.
Even with two big post-earnings rallies in 2019, Nutanix shares are down almost 20% on the year as the S&P 500 SPX, +0.23% has gained 25%.
