Why Goldman Sachs Is Dropping Bearish Nutanix Stance After Q1 Beat

Nutanix Inc NTNX reported higher-than-expected top- and bottom-line first-quarter results Monday. 

The company’s annualized contract value billings showed signs of stabilization, while its balance sheet is stronger after a $750-million investment by a financial sponsor in August, according to Goldman Sachs.

The Nutanix Analyst: Rod Hall upgraded Nutanix from Sell to Neutral and raised the price target from $18 to $32.

The Nutanix Thesis: The company’s renewals mix rose significantly in the quarter, which is “a positive sign that customers are renewing contracts at a high rate and this should lead to better operating leverage for Nutanix over time,” Hall said in a Tuesday upgrade note.

Nutanix reported fiscal first-quarter ACV billings of $138 million, representing 9% year-on-year growth, beating the consensus estimate by 15%.

The guidance for the fiscal second quarter came at $147 million at the midpoint, 9% higher than the Street expectations, he said. 

“At the end of the day we believe Nutanix is successfully transitioning to a recurring software model in a very challenging business environment.”  

NTNX Price Action: Shares of Nutanix were up 5.09% at $29.92 at last check Tuesday.