JPMorgan cuts Nutanix stock target by +20%, keeps overweight By Investing.com

On Friday, JPMorgan adjusted its outlook on Nutanix (NASDAQ:), a leader in hybrid multicloud computing, by reducing its price target to $65 from the previous $80 while maintaining an Overweight rating on the stock.

The firm anticipates that the company will likely adopt a conservative stance regarding its fiscal year 2025 (FY25) guidance, which ends in July. This conservative forecast is expected to align with the lower end of the milestones set during Nutanix’s 2023 investor day, affecting both revenue and Annual Recurring Revenue (ARR).

Nutanix’s stock performance has been a mix of highs and lows, with shares seeing a 10% year-to-date (YTD) increase compared to the software index’s 6% rise. However, from the peak in late May before its third fiscal quarter in 2024, Nutanix’s shares have fallen by 28% as of May 21, 2024, while the software index gained 2%. This indicates that some of the uncertainty around the upcoming guidance may already be factored into the stock’s price.

Despite the lowered price target, JPMorgan’s outlook for Nutanix remains positive, with expectations of high-teen growth for ARR at a scale of over $2 billion and a forecast for generating a Free Cash Flow (FCF) margin in the low twenties percent. The firm’s analyst suggests that the company’s current market position, product portfolio, and financial model place it in a strong position to capitalize on future opportunities.

JPMorgan’s stance is that while there are risks related to execution, the overall narrative for Nutanix remains compelling. The firm expresses a readiness to invest in Nutanix shares, particularly if any post-earnings release weakness presents a buying opportunity. The analyst’s comments underline a belief in the company’s medium-term potential and its ability to navigate the growing market landscape.

In other recent news, Nutanix, a key player in the hyper-converged infrastructure (HCI) and cloud computing landscape, announced its Q3 FY2024 earnings, reporting a revenue of $525 million and a year-over-year growth of 24% in annual recurring revenue (ARR) to $1.82 billion.

The company also secured significant contracts, including an eight-figure annual contract value (ACV) deal with a North American financial services company and a major renewal and expansion with a Fortune 500 consumer packaged goods provider.

In terms of personnel, Nutanix appointed Brian Martin as Chief Legal Officer, bringing over two decades of legal expertise in the B2B technology sector to the company. On the analyst front, BofA Securities maintained a Buy rating on Nutanix shares, despite a slight reduction in the price target from $75 to $72. The firm acknowledged Nutanix’s potential to gradually increase its market share at the expense of VMWare, now a part of Broadcom (NASDAQ:) Inc.

Piper Sandler also maintained an Overweight rating on Nutanix shares, citing several growth factors. Contrastingly, Northland Securities Inc. downgraded the stock to Market Perform from Outperform, despite maintaining a price target of $71.00. These developments highlight the mixed views of analysts on Nutanix’s prospects.

Finally, Nutanix has provided an optimistic guidance for Q4 FY24, projecting ACV billings between $295M and $305M, and revenue forecasts of $530M to $540M. These projections, coupled with strategic partnerships with industry giants like Cisco (NASDAQ:), Dell (NYSE:), and Broadcom, suggest a continued growth trajectory for Nutanix in the dynamic world of cloud computing and hyper-converged infrastructure.

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