Nutanix (NTNX) has surged over the past year by more than 65%, driven by the cloud computing company’s strong Fiscal Q4 results and Broadcom’s (AVGO) closing of its $69 billion acquisition of VMware late last year. Let’s take a look at whether Broadcom’s acquisition of VMware could help or hinder, unlocking new opportunities or posing challenges for NTNX.
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Nutanix Could Benefit from AVGO’s Acquisition of VMware
Broadcom’s closing of its acquisition of VMware has raised concerns among customers regarding the future trajectory of VMware’s software development. Considering this uncertainty, Nutanix sees an opportunity to step in and provide an alternative to cloud computing. Additionally, Nutanix is working with Cisco (CSCO) to enable companies’ existing servers, including CSCO’s UCS blade servers, to run on the company’s virtualization platform.
However, NTNX sees a problem with stepping into VMware’s shoes. In fact, the company stated in its annual filing that it may be unable to “capitalize on new opportunities” arising from the VMWare acquisition as a possible risk factor. While the company acknowledged that it sees an opportunity to grow its market share from the acquisition, capitalizing on this opportunity could be a problem.
Why Would NTNX be Unable to Capitalize on this Opportunity?
Elaborating further, the company stated that many potential customers might be unprepared to adopt the NTNX platform for another year, largely due to their existing multi-year contracts with VMware or because they may need to wait for their next hardware refresh cycle. Furthermore, the company pointed out that Broadcom could react aggressively to its efforts in pursuing these opportunities.
In fact, TipRanks’ Risk Analysis of NTNX shows that this risk is a part of NTNX’s reported Finance and Corporate risk, which comprises 40% of the company’s total risk profile.
What Is the Price Prediction for NTNX?
As NTNX weighs its risks and opportunities, analysts remain cautiously optimistic about NTNX stock, giving it a Moderate Buy consensus rating based on seven Buys and three Holds. The average NTNX price target of $74.70 implies an upside potential of 22.6% from current levels.
