RBC Capital Starts Nutanix (NTNX) at Outperform
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RBC Capital initiates coverage on Nutanix (NASDAQ: NTNX) with a Outperform rating and a price target of $36.00.
Analyst Matthew Hedberg commented, "The Nutanix platform leverages web-scale engineering and consumer-grade design to converge compute, virtualization, and storage natively into a software-defined solution built on commodity hardware. The result is a lower cost of ownership, cloud-like infrastructure consumption and flexibility, as well as the ability to migrate applications from a private cloud to a public cloud or from public cloud to public cloud for a broad range of applications. Its goal is to make “infrastructure invisible” by giving any organization the power to leverage technology primarily developed and used by web-scale vendors such as Google, Facebook, etc. Its growth is disruptive and targets several markets including hyper-converged infrastructure, virtualization and storage as we forecast a 53% revenue CAGR through CY18, well north of the hardware peer median of 5% and also fast-growing software peers at 32%. We expect gross margins to be ~60% in FY17E and to reach 63–65% at scale, that could go higher with more software-only sales, while operating margins likely reach 15–18%. This margin profile is lower than software peers, but in line with at scale hardware peers. We believe upside to estimates is likely, and with the secret-sauce being their software, we feel confident assigning a multiple closer to fast growing software peers. Initiate with an Outperform rating and $36 target."
Shares of Nutanix closed at $29.77 yesterday.
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