On Friday, JPMorgan (NYSE:JPM) maintained its Overweight rating on Nutanix (NASDAQ:NTNX) and increased its price target to $80 from $70.
The firm's analyst cited strong fundamentals and robust demand as key drivers behind the optimistic outlook for the company. The analyst highlighted that positive feedback from key channel contacts and an achievable set of expectations for the upcoming third fiscal quarter contributed to the decision.
The demand environment for Nutanix remains strong both from existing customers and through emerging opportunities related to VMware (NYSE:VMW) and a partnership with Cisco (NASDAQ:CSCO). A notable increase in the pipeline for VMware-related opportunities was reported, including a potential high-value transaction.
The company's innovation efforts, such as the launch of the Nutanix Kubernetes Platform and revitalized partnerships, including one with Dell (NYSE:DELL), were also recognized as positive factors.
Despite the positive outlook, the analyst pointed out that Nutanix's stock has experienced significant growth, with over a 50% increase year-to-date and a 12% rise since the last earnings report. This compares to a 3% increase for the IGV and an 11% increase for the XLK over the same year-to-date period.
The rapid appreciation in Nutanix's share price has expanded its EV/FTM revenue multiple from 3.6x in May of the previous year to 9.1x currently, indicating that some of the business's positive momentum may already be reflected in the stock price.
The analyst concluded that while it is challenging to predict further significant expansion of the valuation multiple at current levels, the firm remains positive on Nutanix's long-term prospects. The company is seen as well-positioned to capitalize on the growing market opportunities, with execution risk noted as the primary concern moving forward.
InvestingPro Insights
Recent data from InvestingPro supports JPMorgan's optimistic view on Nutanix (NASDAQ:NTNX), reinforcing the company's strong fundamental position. Indeed, Nutanix's gross profit margin impressively stands at 83.85% for the last twelve months as of Q2 2024, reflecting efficient operations and a competitive edge. Additionally, the company's revenue growth remains robust, with an 18.12% increase over the same period, showcasing a sustained demand for its products and services.
InvestingPro Tips highlight that Nutanix is expected to become profitable this year, which is a significant turnaround considering it has not been profitable over the last twelve months. Moreover, the company's liquid assets exceed short-term obligations, indicating a healthy liquidity position that could support ongoing and future business activities. For investors seeking more detailed analysis, there are over 10 additional InvestingPro Tips available, offering deeper insights into Nutanix's financial health and market performance.
With the stock trading near its 52-week high at 96.96% of its peak value and a substantial one-year price return of 181.19%, investors might wonder about the sustainability of this growth. Yet, the InvestingPro Fair Value estimate of $50.23 USD suggests a more conservative perspective compared to the analyst target of $72 USD. Those interested in gaining access to a full suite of analytics and tips can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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