Katy Huberty of Morgan Stanley downgraded Nutanix Inc NTNX to Underweight from Equal Weight on execution issues and rising memory prices.
While January-quarter results were better than forecast, revenue upside was less than buy-side expected in the first full quarter post IPO.
“We downgrade to UW given it will take several quarters to fully address the headwinds,” Huberty wrote in a note.
Huberty, who cut his price target to $20 from $29, noted that HPE's acquisition of SimpliVity and Cisco's recent success with HyperFlex make tough competition for Nutanix.
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In addition, commodity driven margin pressure, lower OEM growth, fewer large deals, and higher DSOs Y/Y signal revenue upside is limited near term.
“Recent Dell channel incentives for hyper-converged solutions which were rolled out in early February combined with Nutanix's shift from commercial to large enterprise sales focus could re-accelerate the business, but likely not for ~6 months given typical sales cycles,” Huberty highlighted.
The analyst cut April quarter EPS estimate $0.10 to ($0.45) and FY 2017 EPS view drops by $0.12 to ($1.49) to reflect higher DRAM costs.
At last check, shares of Nutanix plunged 20 percent to $24.92.
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