One of the biggest winners in Friday’s markets was a mid-cap cloud computing company that has been garnering a lot of attention recently from investors. Nutanix (NASDAQ: NTNX) saw its shares surge drastically after reporting its fiscal 2019 Q4 financial results, beating analyst expectations and sending the stock to fresh highs.
The cloud-service company saw its revenue decline by 1.3 percent, a figure that wasn’t as bad as what most analysts were expecting. Revenue for the quarter came in at $299.9 million, $6.4 million higher than what was otherwise anticipated. Nutanix’s non-GAAP earnings per share came in at -$0.57, also beating out analyst estimates at -$0.64 per share. The company has also been striving to move more towards a subscription-based cloud business model, and there was some good news in that regard as well. Subscription revenue had gone up by 72 percent year-over-year to $196 million and accounted for 71 percent of the company’s billings this quarter and 65 percent of their total revenue.
“We delivered a solid fourth quarter and believe our performance reflects our execution improvements and the meaningful progress we have made transitioning our business to a subscription model,” said Dheeraj Pandey, Founder and CEO of Nutanix in a statement. “We are encouraged by our record gross margins, strengthening pipeline, progress in sales hiring, and recent large customer wins. We have a strong set of tenured sales leaders in place and continue to lead the industry as an innovator with technology at the forefront of hybrid cloud transformation.”
Most analysts covering the stock have either a “buy” or a “hold” rating on Nutanix, although there are a handful of experts who are bearish on the stock. The general consensus is that the subscription-based model won’t have as predictable and consistent of an income that management originally hoped to see but are a step in the right direction. In response to today’s news and financial figures, experts are optimistic in general, seeing clear signs of improvement as the long-term picture for the stock looks positive.
Back in fiscal 2018, Nutanix started to transition from a hardware-focused company to a more software-focused business model, with the past two quarters seeing the transition to subscription-based revenues. Currently, its average subscription contract was for 3.6 years.
In response to the news, shares of Nutanix rose by 22.5 percent over the course of the day. However, shares have fallen over the course of the year, losing over half of their value as the stock tumbled from $60 per share in late 2018 to its current price range between $25-$30 per share. While the long-term outlook for the company appears to be getting better, it’s uncertain whether Nutanix is a good short term play.
Nutanix Company Profile
Nutanix Inc provides native hybrid cloud capabilities for businesses. The company offers Enterprise Cloud Platform for businesses for various uses such as web-scale engineering and consumer-grade design, virtualization and storage into a resilient, and software-defined solution. The firm has a business span of over 100 countries around the world. It generates most of its revenues through the license fees and supports services. – Warrior Trading News
