Nutanix (NTNX) Stock is Rallying Following Q3 Earnings, Analyst Says Shares Still Looks Undervalued

November 24, 2021 8:59 AM EST
Get Alerts NTNX Hot Sheet
Price: $32.60 +1.05%

Rating Summary:
    18 Buy, 7 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 25 | Down: 13 | New: 72
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Shares of Nutanix (NASDAQ: NTNX) are up more than 5% in pre-open Wednesday after the company reported better-than-expected Q3 results.

Nutanix reported Q1 EPS of ($0.22) to easily top the analyst estimate of ($0.34). Revenue for the quarter came in at $378.5 million versus the consensus estimate of $367.04 million.

“Our first quarter was a good start to our fiscal year, demonstrating strong year-over-year top and bottom-line improvement,” said Rajiv Ramaswami, President and CEO of Nutanix. “We continued to execute towards our targets of free cash flow break-even in the second half of calendar 2022 and a 25 percent-plus ACV billings CAGR through fiscal 2025.”

For this quarter, NTNX is calling for sales between $400 million and $410 million while the analyst consensus was $399.94 million. On a full-year basis, Nutanix is seeking revenue between $1.615 and $1.63 billion, versus the consensus of $1.6 billion.

JMP analyst Erik Suppiger reiterated a Market Outperform rating and a $48.00 per share price target on positive earnings and guidance.

“We continue to believe NTNX is undervalued at 3.2x our EV/CY23E revenue as the underlying momentum in the business reflects some numbers achieving the first high watermark in two years, such as ACV billings growth, and this momentum is broad-based across the entire hybrid multi-cloud portfolio for both core and emerging products. We believe these developments will foster durable growth, especially in the context of the low-cost subscription renewals, which will increase leverage in the model, in addition to the company’s increasing focus on technology partnerships with other best-of-breed providers for virtualized applications and multi-cloud environments,” Suppiger said in a report to clients.

Wells Fargo analyst Aaron Rakers lowered the price target to $40.00 per share from the prior $42.00 on the Equal Weight-rated Nutanix stock.

“With increased predictability from subscription renewals (focus on acceleration in F4Q22) and consequent opex leverage, as well as solid FCF execution/tracking toward positive FCF in 2H C2022, we believe shares are justifiably trading higher as NTNX provided investors with increased confidence in the company's path to profitability,” Rakers wrote in a note.

Nutanix shares closed at $32.58 yesterday.

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