Wednesday, an Oppenheimer analyst initiated coverage on Nutanix (NASDAQ:NTNX), a leader in hyperconverged infrastructure (HCI) solutions, with an Outperform rating and an $80.00 price target. The new target is based on 8.3 times the company's estimated calendar year 2025 enterprise value to sales ratio.
Nutanix's positive rating stems from its advantageous position in the HCI market and its potential to outperform key competitors like VMware (NYSE:VMW). The analyst pointed out that VMware is currently experiencing customer pushback due to recent price increases. This situation presents an opportunity for Nutanix to gain market share.
The company is also expected to benefit from the growing demand for infrastructure that supports artificial intelligence (AI) applications, specifically the handling of unstructured data. These factors are anticipated to drive an increase in new customer acquisitions and further business with existing clients.
Furthermore, Nutanix's continued improvement in operating margins is another reason for the optimistic outlook. The company's financial performance is expected to surpass the industry's Rule of 40 metric, which measures a balance between growth and profitability.
The analyst believes that as Nutanix continues to meet and exceed these industry benchmarks, its valuation multiples are likely to be re-evaluated upwards. This reassessment could lead to a higher stock price for the company in the future.
In other recent news, Nutanix has experienced significant growth, as evidenced by an 11% year-over-year increase in Q4 revenue, totaling $548 million, and a 15% rise in full-year revenue to $2.15 billion. The company's Annual Recurring Revenue (ARR) and Annual Contract Value (ACV) billings also increased by 22% and 21% respectively.
Morgan Stanley (NYSE:MS) upgraded Nutanix's stock from Equal-weight to Overweight, based on the potential for Nutanix to capture a portion of VMware's install base over the next five years, which is expected to boost Nutanix's growth rate. RBC Capital and JPMorgan (NYSE:JPM) have also raised their price targets for Nutanix to $75.
Furthermore, Nutanix has disclosed the fiscal year 2025 compensation details for its top executives, including a base salary of $800,000 for President and CEO Rajiv Ramaswami. The company has also announced the upcoming retirement of its Chief Operating Officer, David Sangster, effective October 31, 2024.
For the fiscal year 2025, Nutanix expects its revenue to be between $2.435 billion and $2.465 billion, with non-GAAP operating margins ranging from 15.5% to 17%.
These recent developments provide a snapshot of the current state of Nutanix, offering insights into the company's performance and future expectations as projected by analysts from Morgan Stanley, RBC Capital, and JPMorgan.
InvestingPro Insights
Recent data from InvestingPro aligns with the analyst's optimistic outlook on Nutanix (NASDAQ:NTNX). The company's market capitalization stands at $19.35 billion, reflecting investor confidence in its growth potential. Nutanix's impressive revenue growth of 15.35% over the last twelve months, coupled with a robust gross profit margin of 84.94%, underscores its strong market position and operational efficiency.
InvestingPro Tips highlight that Nutanix's net income is expected to grow this year, with 8 analysts revising their earnings upwards for the upcoming period. This aligns with the article's mention of improved operating margins and potential for surpassing industry benchmarks. The company's strong return over the last three months (42.12%) and impressive one-year price total return of 86.38% further support the positive sentiment expressed in the analyst's coverage.
It's worth noting that Nutanix is trading near its 52-week high, with its current price at 98.03% of that level. This performance, combined with the analyst's $80 price target, suggests potential for further upside. Investors seeking more comprehensive analysis can access 16 additional InvestingPro Tips for Nutanix, providing a deeper understanding of the company's financial health and market position.
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