Nutanix Shares May Have Finally Shed Their Reputation For Being Overpriced

A strong market for cloud computing services, solid business model and effective sales mechanism mean Nutanix Inc NTNX could outrun the consensus.

Credit Suisse’s projections for the San Jose tech firm are already above consensus, but those estimates “could prove conservative,” analyst Kulbinder Garcha said in a Monday note.

The firm’s estimates call for revenue of $762 million in fiscal 2017 and $1.2 billion in fiscal 2018 and a long-term revenue upside of $1.4 billion.

Nutanix reported fourth-quarter estimated sales of $215 to $220 million against an estimate of $204.72 million on May 25.

Credit Suisse reiterated its Outperform and $38 price target on Nutanix Monday.

A ‘Sustainable Advantage’ In Cloud

Nutanix could notch customer growth of about 12 percent per quarter, Garcha said.

The company’s focus on the G2000 platform — for large enterprises — “should help both the existing customer deal size and the new customer deal size,” the analyst said.

The company operates in a “noisy competitive” market, but leads with its product, according to Credit Suisse.

“Hyperconvergence” is the buzz word in the cloud sector, Garcha said. He mentioned the Hewlett Packard Enterprise Co HPE acquisition of Nutanix competitor SimpliVity for $650 million that was announced in January, as well as an expected launch of SolidFire HCI by NetApp Inc. NTAP.

“With a significant [total available market] of $32 billion, we believe Nutanix’s sustainable advantage remains in its software, which enables scalability and simplicity, with an option of its own hypervisor and lower [total cost of ownership].”

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