Stiff Competition Could Sink Nutanix Stock
Competitors are quickly encroaching on this tech stock’s market share, despite its impressive top-line growth. Now, through acquisitions and majority control, one competitor controls nearly half the market and has the ability to cut this firm’s market share. Risk of losing market share, when coupled with highly negative margins, unsustainable cash burn, and a soaring stock price mean @Nutanix Inc. ( #NTNX) is this week’s Danger Zone pick.
This detailed market share analysis reveals that, while Nutanix is the market leader, Dell, because of its ownership of VMware, holds the majority of power in the industry.
When Dell, EMC, and VMware market shares are combined, and hardware running NTNX software is excluded, they control 49% of the HCI market. More troubling for NTNX bulls, since Dell bought VMware in 2016, VMWare’s market share has increased at a much faster pace than Nutanix.
With a controlling (and financial) interest in @VMware, @DellEMC could limit Nutanix’s growth potential by promoting its own VMware product in favor of Nutanix’s software. Such a decision would instantly impact NTNX’s top-line, as Dell accounted for 10% of NTNX billings in fiscal 2016 and 2017. More importantly, Dell could inhibit NTNX’s potential market share, which, when excluding Dell hardware, was just 21% in 2017, down from 22% in 2016.
Nutanix provides enterprise cloud software that combines traditional servers, virtualization, and networking hardware/software into one integrated solution, also known as hyperconverged infrastructure (HCI). This market, along with the larger enterprise software market, is highly competitive. @Nutanix ’s main competitors include @VMware ( #VMW), @Cisco ( #CSCO), @DellEMC, @RedHat ( #RHT ), @NetApp ( #NTAP), @Hewlett Packard Enterprise ( #HPE), as well as #publiccloud providers @Amazon ( #AMZN ) and @Google ( #GOOGL ).