Nutanix Analysts See Tremendous Long-Term Potential

Nutanix Inc NTNX, a $4 billion valued provider of enterprise cloud platforms, has seen its stock dip more than 17 percent since its recent initial public offering. Now that the quiet period has ended, research firms are beginning to release their analysis of the stock.

Jayson Noland of Baird initiated coverage of Nutanix with an Outperform rating and $37 price target given the company's leadership position in a large market.

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According to Noland's research, Nutanix is the market leader in the hyperconverged market and outranks EMC, VxRail, Cisco Systems, Inc. CSCO's HyperFlex, and Simplivity. In fact, the analyst suggests that the newly-IPOed company even commands a market share of 25 percent to 30 percent.

The analyst said Nutanix's portfolio also includes a free, next-generation hypervisor called AHV and management functionality that is similar to VMWare's vCenter.

"Nutanix derives a mid-teens percent of bookings from software-only sales to OEM partners Dell and Lenovo," Noland added. "We expect that percent to increase. We recognize this creates some uncertainty in the long-term operating model but we like that the company has the ability to adjust in a rapidly changing industry."

Bottom line, Noland suggested Nutanix could prove to be a take-out candidate as Cisco reportedly tried to acquire the company in 2015. In the meantime, a $37 price target is based on the analyst's discounted cash flow model and comp table of leading infrastructure software players.