I first mentioned Nutanix (NTNX) on this blog back in December 2017. It was one of my Three Growth Stocks for 2018. Since then, the stock is up +55.1% and I believe it still has more upside.
Just to review, Nutanix pioneered a type of enterprise computing, known as hyper-converged infrastructure (HCI), that combines server, storage and virtualization software in a single machine. Their technology allows datacenters to run more efficiently. Goldman Sachs recently called Nutanix a “once-in-a-decade tech infrastructure story.” They are the one of the fastest technology companies ever to reach $1 billion in sales and their recent shift from a hardware-based model to a mostly software-based one has helped the company increase profit margins.
I am highlighting it this week because their annual user conference starts on Tuesday, May 8th in New Orleans. They will possibly announce new products, contracts, partnerships and other developments at the company. I have some colleagues who are attending the event and I will tweet any important news if it becomes available. In addition to the conference, the stock has technically held up very well during the market’s recent correction and closed near an all-time high on Friday.
In late April, the company announced that their public cloud offering would be delayed due to engineering issues. This product has been called an “Amazon cloud killer” because it would rival Amazon’s Web Services business. Some analysts defended this delay citing that any revenue from this product would be minimal this year, as it takes time for the product to come to market. Nutanix’s CEO even said that targeting Amazon is harder than expected. His team wants to take the time to do it right and not alienate customers with a flawed product.
My view is that Amazon is usually the one “killing” other companies. The fact that a company is even working on an “Amazon killer” shows confidence in their management team and their product offering. In addition, most of Nutanix’s competitors have already been acquired by tech heavyweights such as Hewlett Packard Enterprises and Cisco Systems. Whether they stay independent or eventually get acquired, I still feel the company has more upside over the next 6-12 months. Good luck!
I can be reached at: jfahmy@zorcapital.com.
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