My thoughts. Take them for what they are worth.
Has anyone held stocks that have fallen 30-50% over several quarters and then reaped the gains? I ask because in the past, even great multi-baggers like Starbucks and Netflix have underperformed the S&P indexes over extended periods.
Everyone remembers the rare exceptions like Netflix and Starbucks that came back big. But how about the hundreds that didn’t come back at all. Like Westport for instance, that the Fool loved, and that starred in a lot of their bulk advertisements (and that I became famous for warning against and infuriating all the loyal Westport investors). It was in 2013, I think, and it was over $30. When it got Down to $25 they thought it was a bargain and bought more, at $20 they “loaded up the truck,” at $15 they “doubled down,”… all the way down. It’s now at about $1.50 six years later.
And others that didn’t dry up like that but have been dead money for years. Like Chipotle Mexica Grill. Their troubles were supposed to be very temporary too, as I’m sure you remember. Well, it’s four and a half years and they are still not back to where they were in Sept of 2014. Anyone who held has had dead money for all that time while we have been making money hand over fist.
Coming to Nutanix we have identified several reasons - complexity, poor sales execution etc. They are all valid and the stock may take a while to recover. The general consensus seems to be to sell Nutanix and buy other better executing/growing companies like ZS, TWLO, MDB, TTD etc. But those stocks may also hit a speed bump? Most of us felt Nutanix had the best chance for multiple expansion till last week.
Remember that we thought Nutanix had a great chance of multiple expansion because they had already sold off while everything else was going up. And why did they sell off so greatly even before this sell-off. It’s easy to forget but they sold off even before this huge additional sell-off because this wasn’t a simple picture like Zscaler or Twilio, or Alteryx, or Trade Desk even then (I’d exclude MDB from that comparison) . They were even then having all sorts of problems because of trying to change from a hardware company to a software company to a SaaS company all at once, with revenues apparently falling and huge quarterly losses.
And now, in the middle of it all they are having sales problems too, which they should have seen coming six months ago but ignored, and don’t forget the complexity issue. A few months ago we must have had threads 50 to 100 posts long trying to figure out what Nutanix does. And most of us could never figure it out. If you don’t think that that makes the sales cycle longer, maybe you are not thinking about the upper management of non-tech companies that have to okay the sales.
Thus the chance of Twilio or Zscaler or Alteryx having this kind of melt down are about as close to ZERO as you can get. They are roaring along at 50% to 70% growth. That’s nothing like where Nutanix was even before the latest train wreck.
Thus to me, the idea of staying in Nutanix and “HOPING” that they can fix it all in a year or so, because you hate to admit you had been wrong… (you weren’t wrong, there was no way to foresee this latest disaster)… or because you don’t want to take a loss (Wow, with all our gains, taking a loss seems wonderful to me)… seems very misguided to me (I was going to say “insane”, but I decided to soften it). I’m not saying that they will go to near zero like Westport, but I certainly think they might well take two to four years to come back to their high, like Chipotle. I can sure find better places for MY money in the meanwhile, and if I change my mind I can always buy back in.
Feel free to ignore everything I wrote if you want to.