What To Do With Nutanix Stock Following Q3 Beat And Raise

Nutanix Inc NTNX's stock is higher by more than 15 percent at $20.35 in reaction to a strong fiscal third quarter earnings report but longer-term shareholders are still feeling some pain as the stock peaked at $46.78 over the past year.

Piper Jaffray's Andrew Nowinski answered a pressing question in a research report as to what investors should do with Nutanix's stock. The analyst suggested that the strong gains in reaction to the earnings report could signify "investor relief" that the company is "back on track," especially following a poor fiscal second-quarter report in January.

Nowinski highlighted Nutanix's significant gain in its backlog in the quarter along with a 171-percent year-over-year growth in large deals. Although the analyst also noted billings did fall short of expectations in the quarter, the company confirmed it boasts a "strong competitive advantage."

'Mixed' Guidance

While analysts at Credit Suisse described Nutanix's guidance as "robust," Nowinski thinks the company's outlook is "mixed."

Nowinski explained that Nutanix's revenue outlook of $215 million to $220 million is "well above" the $204.7 million analysts were expecting. But the company also disclosed its expenses will increase in aggregate by around $10 million quarter, which will yield a worse than expected operating loss in future reports.

As such, the analyst maintains an Overweight rating but with a price target lowered from $36 to $27 to reflect the company's higher operating expenses which is needed to sustain revenue growth.

At time of publication, shares of Nutanix were up 11.38 percent at $19.57.

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