Nutanix: Fundamentals Driving Optimism
Summary
- NTNX is breaking out higher.
- Its top-line growth is impressive.
- I am buying stock in the name.
Nutanix (NASDAQ:NTNX) is trending strongly higher on solid fundamental support. The stock recently broke out to near record levels after months of consolidation. NTNX is showing strong top-line growth, while its also attempts to reverse its earnings per share losses. Additionally, the company continues to invest in acquisitions, and push along its innovative product solutions to drive future growth. I am buying stock in the name with a stop-loss point below previous resistance levels.
Price Action
I am buying shares of NTNX as its fundamental story leads investors to push it above key resistance levels. On both its short- and long-term charts, the company is breaking out higher. The monthly chart shows a breakout to near record levels above $42. The company has only been public since 2016, but has formed a strong base formation which it is now breaking higher out of.
On its shorter-term charts, its recent consolidation is giving way to buying support. From late 2017, to late last week, the company's share price had held below $38.5. Today's breakout however, was significant, with investors pushing the stock nearly 8% higher on the day. Strong fundamental support is backing the move higher, which gives me confidence in adding a long stock position. I am using a stop-loss point of $37.5 should investor sentiment wane, leading to selling pressure.
Source: Trading View
Fundamental Narrative
NTNX is seeing improved investor optimism as it grows at a strong pace, while also investing in innovative new technologies and acquisitions. In the most recent quarter, the company saw strong deal momentum. Specifically, their move towards a software-defined business model has helped them accelerate their large deal flow.
The company provides an enterprise cloud operating system in North America, Europe, the Asia-Pacific, the Middle East, Latin America, and Africa. Its cloud operating system converges traditional silos of server, virtualization, storage, and networking into one integrated solution; and unifies private and public cloud into a single software fabric.
In the previous quarter, NTNX secured 57 deals worth more than $1 million, up 104% year-over-year, according to management. They also had 19 software and support deals worth more than $1 million. The company now has 57 customers with over $5 million in lifetime bookings, 18 customers with over $10 million in lifetime bookings, and 10 customers with more than $15 million in lifetime bookings, up significantly from the previous quarter, according to management. The growth of new customers and support of previous ones signals NTNX is offering a competitive product, with marketplace demand evident.
Additionally, last month, Gartner published its Magic Quadrant for Hyperconverged Infrastructure. NTNX's position in the matrix indicated the analyst's belief in its completeness of vision access and highest on the ability to execute, a testament to the company's product quality, customer service and end-user delight, management stated.
Software-defined infrastructure is gaining ground in enterprise, which marks an inflection point for hyperconvergence of disparate data center tiers on a common operating system in the private cloud, according to Gartner.
In coming years, NTNX intends to push forward with hyper-converging disparate cloud data centers using a common software platform that they call Enterprise Cloud OS. Enterprises have already started to migrate toward application mobility. This push to hyperconvergence leads NTNX to expand their ecosystem, while also offering more solutions for new and current customers.
Moreover, the company recently signed a definitive agreement to acquire a company called Minjar. Minjar is the maker of Botmetric, a service built for the AWS marketplace, providing customers with unified cost control and enhanced operational insights into their workloads running in public clouds.
NTNX expects Botmetric will enable its customers to embrace multi-cloud architectures, giving cloud operators the freedom to choose the best environment for their business applications in data. In addition to Botmetric, Minjar also offers SmartAssist Assurance for customers to adopt public cloud services in a hassle-free manner and Minjar managed cloud service, which significantly offloads customers from public cloud management and operational minutia. Minjar offers a lot of potential and as was said earlier, expands NTNX's overall product solutions in an environment of strong demand for its current offerings.
Below is a chart of NTNX's revenue and earnings per share metrics. Over the last few years, the company has grown revenue at a rapid pace, while earnings per share is limiting losses. The company remains a speculative venture, but is exploring exciting technologies, leading investors to bid its shares higher.
Conclusion
NTNX is trending strongly higher on solid fundamental support. The stock recently broke out to near record levels after months of consolidation. NTNX is showing strong top-line growth, while its also attempts to reverse its earnings per share losses. Additionally, the company continues to invest in acquisitions, and push along its innovative product solutions to drive future growth. I am buying stock in the name with a stop-loss point below previous resistance levels.
This article was written by
Analyst’s Disclosure: I am/we are long NTNX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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Comments (26)
I better sell my all 5000 shares I bought between 16 and 19 this past summer.
Someone's smoking crack. I wonder whom?
