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What's in the Cards for Nutanix (NTNX) in Q1 Earnings?

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Nutanix Inc. (NTNX - Free Report) is set to report its first-quarter fiscal 2017 earnings on Nov 29, 2016. This will be the company’s first earnings call since it went public on Sep 30. The enterprise cloud platform provider raised almost $238 million by selling 14.87 million shares at a price of $16.00 per share.

Although the stock surged 131.3% to close at $37.00 on debut, the share price has significantly come down in the last couple of months. Since Sep 30, the stock is down 8.11% as compared with the Zacks It-Services industry decline of 0.43%.

Nutanix’s enterprise cloud platform “converges traditional silos of server, virtualization and storage into one integrated solution and can also connect to public cloud services.” The company’s offerings include two software products Acropolis and Prism, which are delivered on x86 servers.

In fiscal year 2016, revenues soared 84% year over year to $445 million, slightly lower than almost 90% surge it posted in fiscal 2015. However, net losses widened from $84 million in 2014, to $126 million in 2015 and $168 million in 2016. The company anticipates reporting net loss for the foreseeable future.

Key Factors

We believe that Nutanix is well positioned to benefit from the strong growth prospect of hyperconverged integrated systems (HCIS). Per market research firm Gartner, HCIS will grow 79% to reach almost $2 billion in 2016. By 2019, HCIS will be the fastest-growing segment of the overall market for integrated systems, reaching almost $5 billion.

Per MarketWatch, Nutanix had 3,768 end customers as of Jul 31, 2016, which includes the likes of Activision Blizzard (ATVI - Free Report) and Nintendo.

However, intensifying competition is a key concern. Dell’s majority control over VMware (VMW - Free Report) , post the EMC acquisition is a major headwind for Nutanix. If Dell chooses to use VMware products instead of Nutanix, the company’s top-line growth will suffer, consequently impacting stock price.

NUTANIX INC-A Price and Consensus


NUTANIX INC-A Price and Consensus | NUTANIX INC-A Quote

Earnings Whispers

Our proven model does not conclusively show that Nutanix will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, currently stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 44 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Nutanix has a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here is a stock that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter:

Supernus Pharmaceuticals (SUPN - Free Report) , with an Earnings ESP of +30.77% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

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