Nutanix (NTNX) PT Lowered to $28 at Susquehanna; Reiterates Neutral
Susquehanna lowered its price target on Nutanix (NASDAQ: NTNX) to $28.00 (from $29.00) while maintaining a Neutral rating.
Analyst Mehdi Hosseini commented, "NTNX remains an intriguing secular story in Enterprise IT, but we remain Neutral at current levels as it remains unclear if NTNX can drive the requisite revenue growth and operating leverage necessary to accelerate profitability ahead of our current expectation of 2HFY20. In fact, NTNX's Apr Q guide implies a ~54% Y/Y increase in Opex amidst a ~50% Y/Y increase in Gross Profit. As such, we take a wait and see approach to see if sales productivity materializes into strong billings growth. Additional key takeaways from last night's report and call include: 1) NTNX attributed softer Jan Q billings growth to lower productivity in North America, as a result of disruptions associated with promotions of top performing personnel, 2) Jan Q Global 2000 additions have remains relatively constant with Oct Q and July Q levels, but we believe increased traction with new G2000 onboarding can drive leverage in the model, given attractive repeat order trends of 7.4x vs. corporate average of 3.8x, and 3) NTNX plans on accelerating the change in software Rev recognition by 1 year, which we believe can have a material impact to reported top-line and gross margins, however, given the stock's current ~4.6x EV/Sales multiple, we believe the power of the software model has already been priced into shares. We are revising our FY17/FY18/FY19 EPS to ($1.52)/ ($1.08)/($0.50) from our prior est. of ($1.42)/($1.03)/($0.50). We are also lowering our PT to $28 which reflects a sum-of-the parts valuation on NTNX's CY20 Hardware, Software and Services revenue discounted to CY17."