Will Short Sellers Hang On To Nutanix?

• Bank of America and other analysts are bullish on this software company.
• Yet short sellers have been betting heavily against the stock.
• Its share price has been flat in the past few weeks.

A meeting with the chief financial officer and other executives at Nutanix Inc NTNX was enough to convince Bank of America's Wamsi Mohan that that the company's long-term opportunity is unchanged and it remains in "hyper growth mode." But will short sellers get on board?

As of the most recent reporting date, the number of shares short was more than three times greater than it was at the beginning of the year. Yet Mohan maintains a Buy rating on Nutanix shares, with the price target boosted from $30 to $35. He sees the company growing 35 percent next year. And a Piper Jaffray analyst also projected increasing traction at the company after recent investor meetings with the company. So, can we expect to see short interest dwindle on the next settlement date (Sept. 15) or after?

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At the end of last month, short interest in Nutanix was at its second highest level so far this year. Between the Aug. 15 and Aug. 31 settlement dates, this cloud computing software company saw the number of its shares short jump more than 9 percent to about 15.35 million. That represents 24.6 percent of the total float. Year to date, the short interest was only higher at the end of June. At the average daily trading volume as of the end of August, it would take more than five days to cover all short positions.

Nutanix shares rose more than 3 percent during the latest short interest period, when the company reported better-than-expected quarterly results, though they did not impress every analyst. The S&P 500 saw a less than a 2-percent gain in that time. The stock is still trading about where it was at the beginning of this month, after retreating in the wake of the Mohan call. The consensus recommendation of analysts polled by Thomson/First Call is to Buy the shares.