NTNX Stock Forecast: The Cloud Stock With More Double-Digit Upside

 NTNX Stock Forecast

Nutanix Stock Continues to Gain on Rising Demand

The technology landscape is changing fast. This has forced companies to adapt quickly. One of the key trends is the rise of cloud computing. As more and more companies try to gain from the shift to the cloud, there are a few noticeable players that stand to benefit. Investing in the stocks of these players could bring handsome returns to investors.

One such case is Nutanix Inc (NASDAQ:NTNX). It is a leading cloud computing software company known for its enterprise cloud operating system: “Nutanix Enterprise Cloud OS.” Its cloud platform powers many of the world’s business applications and end-user services.

The company gives its customers freedom of choice across various types of cloud environments.

Simply speaking, the cloud refers to shifting computing power and storage of data to a service provider and accessing it through the Internet.

The public cloud is used by companies that do not want dedicated data storage infrastructure. They instead store their data and applications on public platforms like “Amazon Web Services” (AWS) by Amazon.com, Inc. (NASDAQ:AMZN) and “Microsoft Azure” by Microsoft Corporation (NASDAQ:MSFT).

A private cloud, on the other hand, is a particular model of cloud computing wherein the companies own their data storage and applications. This kind of cloud infrastructure is for exclusive use by a single organization.

A hybrid cloud, as the name suggests, is a combination of both public and private clouds.

As the volume of data continues to grow exponentially in this digital world, companies are increasingly turning to different cloud environments as per their specific needs. They could go for private, public, or a hybrid cloud solution.

Nutanix has made this transition very simple for its clients. Its technology for IT infrastructure management has taken the enterprise technology world by storm. As the cloud computing landscape evolves, NTNX stock should continue to make higher gains.

As per a report by MarketsandMarkets Research Private Ltd., the global Managed Services market is expected to grow from $180.5 billion in 2018 to $282.0 billion by 2023. (Source: “Managed Services Marketby Service Type,” MarketsandMarkets Research Private Ltd., last accessed January 15, 2019.)

Nutanix is present in a significant segment of this market, and is well positioned to gain from its growth.

The company delivers a single software operating system that runs across different clouds, blurring the boundaries between private, public, and distributed clouds. Clients can easily switch between the different types of environments, depending on their work.

Nutanix’s sales have been growing steadily, and the future looks even brighter as more companies shift to the cloud. The following table shows the growth in the company’s revenue over the last four quarters:

Quarter 10/31/2017 1/31/2018 4/30/2018 7/31/2018 10/31/2018
Revenue (Millions) $275.6 $286.7 $289.4 $303.7 $313.3
Growth 4.0% 0.9% 4.9% 3.2%

(Source: “Nutanix Inc Quarterly Reports,” Nutanix Inc, last accessed January 15, 2019.)

The company announced its first-quarter fiscal-year 2019 financial results at the end of October 2018. Revenue reported was $313.3 million, as compared to $275.6 million from the first quarter of the previous fiscal year.

Software and support billings grew 50% year-over-year to $351.0 million. Subscription revenue is up 104% over the year to $127.0 million.

Nutanix reported free cash flow of $20.0 million as compared to the negative free cash flow of $7.9 million in the first quarter of fiscal-year 2018. (Source: “Nutanix Reports First Quarter Fiscal 2019 Financial Results,” Nutanix Inc, November 27, 2018.)

The CEO of Nutanix, Dheeraj Pandey, said that the financial results proved that the company’s core business continued to grow strongly. It puts the company on a solid path to meet its goal of at least $3.0 billion in software and support billings by 2021.

He added:

51% of our billings in our first quarter were derived from subscriptions, up from 31% in the same quarter last year, and our subscription revenue grew 104% year-over-year. As we look ahead, we expect to continue this shift towards subscription, driving a cloud-like, pay-as-you-grow business model.

Nutanix ended the quarter with 11,490 end-customers, having made deals with ABN AMRO Clearing Bank N.V., Airbus SE (OTCMKTS:EADSY, EPA:AIR), Inchcape plc (OTCMKTS:INCPY, LON:INCH), Shinsei Bank Ltd (OTCMKTS:SKLKY, TYO:8303), and others.

Continued financial growth has helped Nutanix stock, which has gained more than 26% since we last covered this stock in Profit Confidential in December 2017.


Chart courtesy of StockCharts.com

Analyst Take

Nutanix is a leader in enterprise cloud computing, and the demand for its solutions remains strong. As the addressable market of this company expands, that will likely drive Nutanix stock further up.

This is a business that can benefit from producing innovative products and services for a wide range of industries. Cloud software providers are growing their revenues at double-digit rates annually, and Nutanix is one of them.