Nutanix Spikes 17% On Earnings Beat; Analyst Downgrades To Hold

Shares in Nutanix (NTNX) spiked 17% in Thursday’s after-hours trading after the company reported an earnings beat thanks to solid large-deal traction, record gross margin, and tight cost control.

Specifically, FQ4 Non-GAAP EPS of -$0.39 soared past Street expectations by $0.28 while GAAP EPS of -$0.93 also beat by $0.15. Revenue of $327.87M topped consensus expectations by $8.41M, and increased 9.3% year-over-year.

Dheeraj Pandey CEO of Nutanix, commented: “We have demonstrated growth in the midst of a pandemic and have now generated $1.6 billion in annual billings.”

He continued: “We also made significant progress on our transformation to a subscription-based business model, with 88% of billings for the quarter coming from subscription. With our shift to subscription nearly complete, the guidance metrics we provide will change accordingly to reflect our business growth, namely focusing on ACV (annual contract value).”

At the same time, Nutanix announced that Dheeraj Pandey will retire following the selection and appointment of Nutanix’s next CEO. Pandey will remain Chairman and CEO while a formal search is conducted by the Board of Directors, the company said.

The cloud computing company also revealed that Bain Capital Private Equity will make an investment of $750 million in convertible notes- with the proceeds used to support NTNX’s growth initiatives.

“Nutanix did post a generally solid FQ420 (several days before the company was expected to release earnings)” wrote Baird analyst Jonathan Ruykhaver post-print.

“However, we are downgrading the stock to Neutral given a lack of visibility into the business model going forward and the execution challenges an aggressive shift towards an ACV focus creates” the analyst told investors.

According to Ruykhaver, additional causes for concern include the announced departure of the company’s co-founder/CEO and general macroeconomic pressures. “Overall, we cannot justify an Outperform rating given the significant lack of visibility near-term” he concludes. (See NTNX stock analysis on TipRanks).

Indeed, analysts are split between hold and buy, adding up to a Moderate Buy stock consensus. That’s with an average analyst price target of $30, indicating upside potential of 38%. Year-to-date the stock is down 31%.