Nutanix Stock, Up Over 200% on the Year, to Continue Rally on Software Transition

Cloud computing software provider Nutanix Inc, already up 49% year-to-date (YTD) and a whopping 227% over the most recent 12 months, has sharply outperformed the broader S&P 500’s 1.5% decline and 11% gain over the same respective periods.

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The nine-year old company, which sells hyper-converged infrastructure appliances and software-defined storage, could see its stock gain another 22% over 12 months from its closing price of $52.51 on Apr 24, according to one team of bulls on Wall Street.

On Monday, Stifel analyst Brad Reback was out with an upbeat note applauding the tech company’s transition to a software-centric business model, indicating that the shift could fuel billings growth and help the firm beat its own forecasts in the upcoming period.

The San Jose, Calif.-based company pleased investors last month after posting another a beat and raise quarter in fiscal Q2. Analysts cheered above consensus results, including a top line gain of 44% from the prior year quarter to $286.7 million and a 57% jump in billings year-over-year to $227.4 million. Investors sent shares of the enterprise cloud computing service provider up nearly 35% in the month of March. The stock lost some momentum late in March, however, when analysts at Goldman removed the company from their conviction buy list, yet kept it at a buy rating.

Nutanix, a leader in the “hyperconvergence” market, which sells software that manages network, storage and server infrastructure in cloud company platforms, has shifted its focus from branded appliance sales to recurring revenue from its software that runs on partner hardware.

“We continue to believe secular tailwinds stemming from hybrid cloud adoption and a number of company-specific drivers can help deliver healthy top-line growth in coming years,” wrote the Stifel analyst.

At an analyst day in New York on Monday, Nutanix said that it forecasts roughly $3 billion in product and support billings for fiscal 2021, reflecting an approximate 40% increase from last year.

Reback sees significnat upside in billings, an indicator of future sales growth, from a handful of positive drivers including “new customer acquisition, expansion at existing customers, geographic expansion, increasing sales force productivity, and channel expansion.”