8. Nutanix, Inc. (NASDAQ:NTNX)
Number of Hedge Fund Investors in Q1 2024: 56
Analyst Average Share Price Target: $73.44
Upside: 35%
Nutanix, Inc. (NASDAQ:NTNX) enables businesses to avail networking, storage, software virtualization, and other technology cloud services under a single platform. Since it’s a pureplay cloud provider, Nutanix, Inc. (NASDAQ:NTNX) future hinges on its ability to not only expand its customer base by signing new deals but also by offering a diversified and differentiated product portfolio and consistently growing its revenue. On these three fronts, Nutanix, Inc. (NASDAQ:NTNX) has demonstrated a mixed bag of performance. Its shares gained 53% in 2023 despite a high rate environment in the midst of high rates as it teamed up with networking giant Cisco to offer the latter’s products bundled with its software. Alongside, investors were also optimistic for Nutanix, Inc. (NASDAQ:NTNX)’s ability to capture the market share vacuum leading from Broadcomm’s acquisition of Vmware. However, the shares tanked by 28% in May 2024 after Nutanix, Inc. (NASDAQ:NTNX) high end fourth quarter revenue guidance of $540 million fell short of analyst estimates of $548 million. Since growth is a central tenet of cloud valuation, the shares tanked. Nutanix, Inc. (NASDAQ:NTNX) might overcome these trends in the future if it keeps signing new customer deals.
On this front, here’s what management had to say during the latest quarter’s earnings call:
I will now provide some commentary regarding our updated fiscal year ’24 guidance, specifically the following four points: first, we are seeing continued and significant new and expansion opportunities for our solutions. However, we continue to see a higher mix of larger deals in our pipeline which is driving greater variability in our new and expansion business. The number of opportunities greater than $1 million in ACV in our pipeline has grown at higher than 30% for each of the last 3 quarters compared to the corresponding quarters last year. Relatedly, the dollar amount of pipeline from opportunities greater than $1 million in ACV has grown at well over 50% and for each of the last three quarters compared to the corresponding quarters last year.
These larger opportunities often involve strategic decisions and C-suite approvals, causing them to take longer to close and to have greater variability in timing, outcome and deal structure. And as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Our fiscal year ’24 new and expansion ACV and ARR performance year-to-date have been affected by these dynamics and have been below our initial expectations at the beginning of the fiscal year. We expect these dynamics to continue in Q4. As an example, for the eight figure ACV transaction in Q3 that Rajiv mentioned, we expect the billings and cash collection to be in Q4, while the associated subscription revenue is expected to be recognized over multiple years starting in fiscal year ’25.
