Seeking Alpha
Long/short equity, special situations, research analyst, portfolio strategy
Profile| Send Message|
( followers)


  • Nimble Storage stock price may have given investors an opportunity to purchase shares at or around its IPO.
  • Nimble's growth opportunity is supported by their financials.
  • The average target price for Nimble presents opportunity for significant returns from current levels.

A Nimble Investor Can Take Advantage of Second Chances

Last December Nimble Storage, Inc. (NYSE:NMBL) entered the public world of investing through its IPO. The stock began trading in the mid-30s before soaring to over $57 intraday in February 2014. At the writing of this article, the stock price is below $24 per share.

(click to enlarge)

(Source: OptionsXpress)

Over the last seven months, Nimble has had quite a roller coaster ride and now is in jeopardy of trading below its initial public offering price of $21 per share. Sound familiar? Perhaps the most anticipated IPO of the decade performed similarly. If you're thinking of Facebook (NASDAQ:FB), you are correct. Second chances for investing seldom happen with companies that offer a growth opportunity like Nimble Storage, Inc.

Nimble designs and sells a flash-optimized hybrid storage platform that it believes is disrupting the market by enabling improvements in application performance and storage capacity using data protection. Nimble's flash storage products provide a powerful platform for business critical applications such as Microsoft exchange and SQL Server, and are integrated with the best-of-breed solutions from industry leaders like Cisco (NASDAQ:CSCO), Citrix (NASDAQ:CTXS), Oracle (NYSE:ORCL), VMware (NYSE:VMW), and Microsoft (NASDAQ:MSFT). In short, the company's software and storage systems handle various mainstream applications, including virtual desktops, databases, email, collaboration, and analytics. One of the major benefits of Nimble's products is the number of different industries they serve. The company sells its products through a network of value-added resellers and distributors to a range of industries comprising cloud-based service providers, education, financial services, healthcare, manufacturing, state and local government, and technology across the globe. As of July 2013, Nimble had over 1750 end-customers and according to their May 29, 2014 press release they now have more than 3000 end-customers.

(click to enlarge)

Additional financial information from this press release revealed total revenue for the first quarter of fiscal 2015 grew to $46.5 million compared to $22.1 million in the first quarter of fiscal 2014, representing growth of 110 percent year over year. Non-GAAP gross margin was 66.2 percent for the first quarter of fiscal 2015, compared to 61.8 percent in the first quarter of fiscal 2014. Non-GAAP operating margin improved to a negative 22 percent, compared to negative 36 percent in the first quarter of fiscal 2014.

Its GAAP net loss increased for the fiscal first quarter at $19.6 million, or 28 cents per basic and diluted share, compared with a net loss of $9.4 million, or 47 cents per basic and diluted share, in the fiscal first quarter of 2014. The company's non-GAAP net loss for the fiscal first quarter was $10 million, or 14 cents per basic and diluted share, compared with a non-GAAP net loss of $8.2 million, or 14 cents per basic and diluted share, in the fiscal first quarter of 2014.

Highlights for Investing

  • Growth rate in acquiring end-customers is on pace to double year over year.
  • Year-over-year revenue growth of 133.5% is of the highest within its Computer Hardware Industry. (Thomson Reuters)

(click to enlarge)

  • Of the 26 other firms within the computer hardware industry that have reported debt to capital, Nimble is among the 25 firms whose balance sheet is free of long-term debt. (Thomson Reuters)
  • The recent selloff in stock price has created an excellent value opportunity for a high-growth company.
  • Nimble's products and services are well diversified:

(click to enlarge)

Risks to Investing

  • Nimble has yet to show a profit even with triple digit revenue growth.
  • Competition from peers in the industry can rapidly change the company's outlook. These include large storage system vendors like EMC (NYSE:EMC) and NetApp (NASDAQ:NTAP), along with systems firms like Dell and HP (NYSE:HPQ) that have acquired specialist storage vendors to complement their own internal development efforts.
  • The lack of company history creates uncertainty in forecasting performance across different business cycles.

Analyst's Price Targets Still Favorable Compared to Recent Price

According to a recent article by the Mideast times, several analysts revise their price targets for Nimble to the downside. However, revised targets still present an attractive investment opportunity. Analysts at Sterne Agee raised their price target on shares of Nimble Storage from $43.00 to $44.00 in a research note on Friday, May 30th. They now have a "buy" rating on the stock. Separately, analysts at Piper Jaffray reiterated an "overweight" rating on shares of Nimble Storage in a research note on Friday, May 30th. They now have a $47.00 price target on the stock, down from previous $50.00. Finally, analysts at Pacific Crest reiterated an "outperform" rating on shares of Nimble Storage in a research note on Friday, May 30th. They now have a $42.00 price target on the stock, down from previous $62.00. Below is chart showing a number of analyst forecast/target prices by Thomson Reuters.

(click to enlarge)

Concluding Remarks

Though Nimble has continued to lose money, the firm seems to be nearing a tipping point toward the road to profitability. Strong revenue growth will ultimately drive earnings. Thomson Reuters research shows analysts' projection for revenues.

(click to enlarge)

Moreover, NMBL's products seem to have caught on with the firms purchasing them. The growth in end-customers suggests an increasing acceptance within the industry.

Given the stock price is off more than 50% from its high in February, Nimble's price offers an unusually hard-to-find value opportunity within the high growth arena.

For investors seeking growth opportunities in technology, Nimble could be just the vehicle to provide handsome returns over the next 12 to 18 months.

While you may have missed the IPO price of $21 per share, Nimble's recent price decline may have given investors a second chance at making money.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.