Wells Fargo: Nutanix Valuation Could Become ‘Even More Compelling’
#Cloudcomputing software company #Nutanix Inc (NASDAQ: #NTNX) is a leader in #hyperconverged infrastructure, or #HCI. The stock, which was trading at stratospheric levels after its 2016 IPO, has returned to more sustainable levels despite the company’s strong fundamental momentum. The Analyst @Wells Fargo Securities analyst Aaron Rakers initiated coverage on @Nutanix with an Outperform rating and $40 price target. The Thesis Rakers is basing his Nutanix bull thesis on four factors, he said: The deepening of the company’s leadership position in HCI. Large-deal momentum. The company’s strategic vision and execution. Attractive relative valuation. The valuation will become even more compelling as Nutanix executes on an expanding software-only delivery model, with ASC 606 revenue recognition, Rakers said. Wells Fargo is positive on Nutanix’ addressable market opportunity. The firm IDC estimates the HCI market will grow from $2.32 billion in 2016 to $7.64 billion by 2021. “This reflects an increase from 3 percent of on-premise spend on x86 servers and external storage in 2016 to approximately 10 percent [at the end of] 2021,” Rakers said. See also: Who’s Impressed With Nutanix Following NEXT Conference? Nutanix’s top-25 customer repeat purchase multiple versus initial purchases has consistently expanded from 14.1x a year ago to 19.4x in July 2017, according to Wells Fargo. The firm views Nutanix’ increasing software-only contributions as a positive, averaging 17 percent of total bookings for the rolling four-month quarters ending with the fourth quarter of fiscal 2017. Wells Fargo projects a revenue contribution from software in the mid-to-high 20 percent range in the third quarter of 2017 after the ASC 606 accounting standard is initiated. ￼ ￼ ￼ @Microsoft Corporation (NASDAQ: MSFT)’s #Azure stack and @VMware, Inc. (NYSE: VMW)’s Cloud for @AWS should be viewed as #Nutanix’ “important long-term competitors,” Rakers said. The Price Action Following its September 2016 IPO, Nutanix shares clocked in a gain of 131 percent. After closing at a high of $44.46 on Oct. 3, 2016, the second session following its debut, the stock was on a broader downtrend until April 2017. Nutanix has been trending higher, although it is still trading off its highs. At last check, shares of Nutanix were rallying 2.05 percent to $28.88.