Nutanix Finds Sell-Side Buyers At Current Levels After Post-Earnings Pullback

Pacific Crest Securities, a unit of KeyBanc Capital Markets, said in a note on Monday it would be buyers of Nutanix Inc NTNX at current levels, with the current valuation about four times its 2018 revenue. The stock had dipped 35 percent since its second-quarter 2017 earnings call.

Analysts Alex Kurtz and Steve Enders see an opportunity for the company to scale its business in 2018, drive billings to $1.3 billion and accelerate share in the $12 billion integrated systems total addressable market.

Sales Team Changes May Bring In Long-Term Benefits

While expressing disillusionment with the timing of domestic sales-team changes following the IPO, Pacific Crest Securities said it sees long-term benefits of a more enterprise-focused sales efforts to secure larger projects from Global 2000 customers. Improved operating leverage and ASPs would result from its ability to drive greater adoption of mission-critical applications, the firm said.

Strategic Asset In Data Center Landscape

The firm views Nutanix is a strategic asset in one of the faster growing sub-segments of the data center landscape with a limited competitive set, including VMware, Inc. VMW and Hewlett Packard Enterprise Co HPE/SimliVity.

Strong Growth And Adoption

The firm also referred to its recent report, where it highlighted the company's growth versus data center peers. According to the firm, Nutanix is a best-in-class platform that attracts national channel partners and enterprise customers. The company added two times new customers last quarter at a pace two to four times more than historical peers, the firm added.

2-Step Recovery In Stock Likely

The firm believes the stock will recover if it can prove that domestic changes can lead to bigger ASPs, which it terms as a second-half of calendar-year 2017 event. This, the firm said, will drive valuation back to five times 2018 revenue. The second step, according to the firm, is to demonstrate in the first half of calendar-year 2018 that it has migrated some Dell pipeline dollars to Lenovo Group Limited (ADR) LNVGY and/or other Nutanix-branded opportunities. This would add another turn to the revenue multiple, helping to achieve the firm's $34 price target.

Pacific Crest Securities has an Overweight rating and a $34 price target for the shares of Nutanix.

At last check, shares of Nutanix were down 4.28 percent at $19.45.

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It Could Take 'Several Quarters' For Nutanix To Overcome Headwinds; Morgan Stanley Downgrades __________ Image Credit: By Nutanix (https://www.nutanix.com/) [Public domain], via Wikimedia Commons