Nutanix Stock Bucks Sell-Off; Rallies on Strong Financials

Nutanix Inc Has Long-Term Potential

The Federal Reserve has been aggressively raising its key lending rate, with promises of more hikes to come. This has sent stocks considerably lower. The Dow Jones Industrial Average has been straddling bear-market territory, trading at its lowest point of this year. Meanwhile, the S&P 500 and Nasdaq are deep in bear-market territory.

Many European stocks have also gone lower as investors digest the news of big interest rate hikes from the Fed, the Bank of England, and the Swiss National Bank.

Some stocks, however, have been bucking the trend. An overlooked tech stock that has been doing well lately is Nutanix Inc (NASDAQ:NTNX).

Nutanix is a leader in enterprise cloud computing. Together with its subsidiaries, the company enables IT teams to build and operate powerful cloud platforms in North America, Europe, Asia Pacific, the Middle East, Latin America, and Africa. (Source: “Corporate Overview: September 2022,” Nutanix Inc, last accessed October 5, 2022.)

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The San Jose, CA-based company serves customers in the automotive, consumer goods, education, energy, financial services, health-care, manufacturing, media, retail, technology, and telecommunications industries, as well as in the public sector.

Nutanix Inc has a long history of adding new customers at a torrid pace, including 620 in its fiscal 2022 fourth quarter. The company has more than 22,600 customers around the world. Three of its customers are Home Depot Inc (NYSE:HD), Seven & i Holdings Co., Ltd. (TYO:3382, OTCMKTS:SVNDF), and TotalEnergies SE (NYSE:TTE).

Top-Line & Bottom-Line Improvements

For the fourth quarter of its fiscal 2022 (ended July 31), Nutanix announced that its revenues slipped by one percent year-over-year to $385.5 million. (Source: “Nutanix Reports Fourth Quarter and Fiscal 2022 Financial Results,” Nutanix Inc, August 31, 2022.

The company’s annual contract value (ACV) billings in the fourth quarter went up by 10% year-over-year to $193.2 million. At the same time, its annual recurring revenue (ARR) went up by 37% year-over-year to $1.2 billion.

Nutanix Inc’s free cash flow (FCF) in the fourth quarter of its fiscal 2022 was $23.2 million, compared to an FCF loss of $42.2 million in the same period of fiscal 2021, for a difference of $65.4 million.

Also in the company’s fourth quarter, the number of its customers with lifetime bookings above $1.0 million increased by 22% year-over-year to 1,841. (Source: “Corporate Overview: September 2022,” Nutanix Inc, op. cit.)

In fiscal 2022, the company’s revenues increased by 13% year-over-year to $1.6 billion. Its ACV billings in the fiscal year went up by 27% year-over-year to $756.3 million, and its ARR advanced 37% to $1.2 billion. The company’s FCF improved from a loss of $158.5 million in fiscal 2021 to a positive $18.5 million in fiscal 2022, for a difference of $177.0 million.

Business Outlook

For the first quarter of its fiscal 2023 (ending October 31, 2022), Nutanix Inc expects to report revenues in the range of $410.0 to $415.0 million, up from $378.5 million in the first quarter of fiscal 2022. It also expects to report ACV billings in the range of $210.0 to $215.0 million, compared to $183.3 million in the first quarter of fiscal 2022.

For fiscal 2023, Nutanix Inc expects to report revenues of about $1.8 billion, for year-over-year growth of about 12%. It also expects to report full-year ACV billings of $895.0 to $900.0 million, for year-over-year growth of up to 19%.

NTNX Stock Is About to Form a Golden Cross

Nutanix Inc’s solid fourth-quarter and full-year results, coupled with strong guidance, have helped propel NTNX stock higher. It’s up by 13% over the last month and roughly 40% over the last three months. Moreover, it’s trading almost 10% above its 50-day moving average.

Another near-term boost could be coming for Nutanix stock. Its share price appears to be on its way to forming an important technical indicator, a golden cross. That’s a bullish chart pattern wherein the 50-day moving average crosses over the 200-day moving average.

NTNX stock also has high long-term growth potential, with analysts suggesting it could climb by as much as 70% over the next 12 months, hitting a potential high of $35.00 per share.

Analyst Take

A leader in the private, hybrid, and multicloud computing sector, Nutanix Inc is a great tech company that has been running on all cylinders.

Its fourth quarter capped off a fiscal year of big top-line and bottom-line improvements. The company’s fiscal 2022 results included significant progress in its subscription model, year-over-year ACV billings growth, and positive FCF—moves that the company believes are sustainable for the long run.