NTNX - Several Surprise Announcements

In my July portfolio summary, I said my expectations for Nutanix’s upcoming quarter were high, but I certainly didn’t expect the extra pieces of positive news that came out alongside earnings on Thursday afternoon, which boosted the stock by about +29% on Friday.

So three pieces of news came out, all unexpectedly after the market closed on Thursday



Earnings was actually scheduled for next Tuesday Sept 1st. On the call, they said they moved it up to a surprise announcement on Thursday afternoon because there was so much additional news that they couldn’t wait to share with shareholders. However, they obviously knew of the news in advance of scheduling the original date, so I’m guessing they were afraid that some of the information would leak and felt they needed to get it out there before the weekend. There was an article on Benzinga on Wednesday about unusually bullish options activity for Nutanix, so all of this probably contributed to them wanting to get the news out as soon as they could.

Long story short with earnings, their transition to subscription continues to move ahead faster than they ever expected. Although the revenue growth rate still shows a single digit growth, the subscription bookings, which are nearly 90% of revenue, and importantly, their subscription bookings continue to be almost all new first-time subscription bookings, so they still haven’t reached the point where subscriptions start to renew, which will make those future subscription renewal revenues very low cost revenue, whereas only the additional new customer bookings will be the higher cost variety once the current ones start to renew in future years.

Nutanix was cash flow positive for the first time that I can remember this quarter, which is likely one of the things that boosted the stock, as some people were worried about their cash burn and the need to raise cash (more on that below, which further mitigates the cash burn risk)

Nutanix’s revenue is still much higher than many of the companies we follow here, and it is very high margin revenue, and their net retention rate is high. In my opinion, the valuation is still incredibly low and I expect that multiple expansion is going to be significant over the next year, even after Friday’s gains.

If you subscribe to Bert’s ticker target, he does a better job than I could of analyzing the quarter’s results so I highly encourage those of you with access to give it a read.

Surprise #1 $750 million investment from Bain Capital


The $750 million is convertible at $27.75, which was 30% above the previous five trading days stock price. While I think it was generous to price this just before the quarterly earnings were released (I expect the stock price would risen somewhat even without the two surprise announcements), the investment from Bain is only good news. They have been a very successful firm and I expect they are going to make a whole lot of money on this investment in NTNX.

When a company like Bain puts almost a billion dollars into a company, they aren’t planning to hold it for 5-10 years, they will be looking to exit, most likely by Nutanix getting acquired, in the next 2-3 years. I won’t be surprised if they let the story play out and see the stock price grow to $65-75 two years from now and then it gets acquired at a premium somewhere close to $90-100/share. That would still be a valuation below $20 billion, for a company that would have revenue, likely around $2 Billion per year, potentially still growing at 25%+, with increasing profitability as the sales and marketing costs should really scale and decline, as a percentage of revenue, pretty significantly over the next couple of years as the subscription revenues renew. Some would have (should have?) thought I was crazy earlier this year buying Jan’22 $55 calls for $1.00-$1.50 when the stock was around $20, but I truly believed the stock could be $75-100 by the time they expire and had the potential to make 25x, or more, in less than two years…definitely a high risk, and still is, but I’m feeling a bit less crazy about those after this week’s news.

Surprise #2 CEO Dheeraj Pandey to step down

I know a lot of people on this board don’t have a favorable impression of Dheeraj, and I’m sure that is probably a sentiment shared by others on Wall Street too so, although I have always liked him, it probably is a good thing that he hand over the CEO role to a manager more capable of steering this ship as it grows from $1 Billion to $2-$3 Billion of revenue.

Dheeraj was one of the founders and was with Nutanix for 11 years. He was a visionary and helped guide this company from nothing into quite a sizable business, and one of the leaders in its industry. However, he probably wasn’t cut out to be a public company CEO for long. Searching on twitter for #NTNX and #Nutanix Thursday afternoon, I was blown away by how many co-workers were tweeting their disbelief and sadness that he was leaving the company. Even with all of the Nutanix financial and company news that had been released that afternoon, those posts were greatly overshadowed by the number of people expressing their gratitude to Dheeraj and wishing him well. No matter how the investing community felt about him, he clearly was loved and revered by those around him that worked directly with him.

I’m betting that Bain Capital wanted to install someone they felt would be a better CEO, as a condition for the investment. Dheeraj will continue to be CEO until they name a new CEO, but I’m betting it will happen pretty soon, probably before the next quarterly earnings. Dheeraj is still Chairman of Nutanix’s board of directors and I haven’t seen any indication that he won’t remain in that role, so he is likely to have a continued prominent role, despite “retiring” from the CEO role.


So that was lot of information to get dropped by surprise this week. Quite a few analysts were on the conference call despite the short warning about it’s re-scheduling, so there seems to be continued interest from Wall Street.

Just to give you an idea where my head is at right now (euphoric to say the least), Friday was definitely the most $ my portfolio has ever increased in a single day and it was almost all related to Nutanix. Although the stock was up about 30% yesterday, my NTNX holdings which include lots of call options, increased 80% yesterday, and is suddenly my biggest holding.

And I had a lot of those NTNX calls in my Roth IRA, which led to my entire Roth increasing by almost 30% in one day. That’s the craziest part to me, a couple decades of IRA contributions and 401k conversions, and it still moved up that much in one day and will continue to compound and grow for another couple of decades without ever being taxed! I had been buying lots of different Sept 11th and Sept 18th calls in in the IRA in recent weeks betting that the stock would move significantly after earnings and most of those have gone up 100% or more in just a few weeks, so those certainly juiced my returns. It was the first time I really bought a lot of shorter term calls on NTNX, usually sticking to LEAPs previously.

I got somewhat lucky in that I sold all of my Fastly shares on Thursday when it was over $97 (shares that I bought just a few weeks earlier for $77 and change) and put the proceeds half into NTNX calls and half into regular NTNX shares. The next day the calls nearly tripled! And the regular shares went up 29%. Sometimes, with timing, it’s better to be lucky than good, I guess!

Even after my 20% AYX holdings got slaughtered at the beginning of August and I was sure this would be a down month for my portfolio, I’m suddenly looking to be up a few percent, as long as it doesn’t drop too much on Monday.

I know there aren’t many on here that follow Nutanix these days so, besides an occasional mention in my monthly portfolio posts, I’ve only posted on the NTNX premium boards, but, so far, I’m glad I continued to follow the story and kept adding when the prices seemed disconnected with where I felt the value of the company headed, especially last summer and then more this spring and summer. At the same time, I certainly appreciate that many of you that are up 100%+ this year are very happy not to be holding NTNX since the beginning of the year (granted the stock had run up about 50% in the second half of 2019 and was at a peak when January started).

I still view the company’s valuation well below where I think it is headed and, despite it rising to now be my largest holding, I don’t plan to sell any purely due to Friday’s rise. I will have to sell the September calls as they get closer to expiration next month, and I’ll likely be reallocating that to other companies, but other than that, I still believe the story still has a long way to play out and will be bright ahead.



Hey Mekong,

Glad you made money but with all due respect I find this post bewildering.

This is a company in the middle of a long and complex transition, who just lost their founder/CEO, whose bench is so weak they need to put a search committee in place to find a new CEO, the workers are rattled by the loss of their leader, they’re growing revenue in single digits, they needed a big infusion from a voracious venture capital company, and are likely to be sold (limiting upside), and the stock price has essentially been cut in half since it came to the board’s attention.

And all this while we have a have a small army of companies crushing their various categories, growing at historic rates, with skyrocketing stock prices, who have tech that our finest tech minds rave about, financials that our board’s financial analysts are in awe of - but Nutanix is your top holding? Also, your success is due to options on a value investing play, two things not covered on this board.

That you hit a homer is awesome - more power to you, but seems to me Nutanix is doing so poorly they agreed to dump their popular founder/CEO in order to secure desperately needed financing. As far as stories go this one has more holes than a donut factory. Nutanix is the Washington Redskins of SID stocks. And as far as Bert’s analysis, I think he’s much better at tech analysis than stock picking.




Hey Dan

I suspect most of the folks on this board probably agree with you, and you certainly make a lot of good points.

I would disagree where you say that Nutanix is in the middle of a long and complex transition. That’s just not the case. They are actually at the end of not one, but two (hardware to software and then software to subscription) long and complex transitions. Fortunately for me at least, even at the end of these two transitions, I felt that I could already see that the tide had turned and the news would be increasingly positive going forward (based on their bookings growth in recent quarters, which tells us a lot more about what is happening here than the GAAP revenue growth) the valuation was still too low and offered a great opportunity.

Will an acquisition limit upside…yes certainly. But if I’m close to correct with how I think that acquisition will play out as described above, we could be looking at a triple or quadruple from here in a couple of years. I will take that “limited upside” all day long. Keep in mind, I would also bet that quite a few of our other companies, like Livongo, will be acquired in the next couple of years too, so this may not actually differentiate Nutanix from many of our favorite companies, we’ll see.

And you’re right, Nutanix’s stock price been cut in half since it was brought to the board’s attention in early 2019. But it’s gone up since I bought many of my shares last summer and then bought a more this spring. Thank goodness I didn’t factor in the fact that it’s been down from a certain date in the past, which tells me nothing about how it will get valued in the future, when I bought those shares.

For the record, I didn’t actually “make” Nutanix my top holding, I only bought enough to make it my fifth biggest holding. Mr. Market did the rest and made it my top holding. But I’m comfortable with it remaining there, slightly ahead of Amazon, right now.

You call NTNX a value investing play. And you’re right, it is. It was extremely cheap (and still is, in my opinion). But I would call any company that is growing their bookings by 30% this year, in the subscription category, that comprises almost 90% of their revenue, to also be a growth company. And that growth was despite significant headwinds this year from covid (hence bookings didn’t increase as much this past quarter). What more could I ask for than a company that currently has high growth bookings (which will translate into upcoming high revenue growth) trading for a value stock valuation?

Don’t get me wrong, combined I still have more of my portfolio invested in our “small army” of companies that you refer to, than in companies like NTNX, AMZN, GH, and KMI that this board isn’t in to (assuming DOCU, MDB, TTD, AYX etc still count as part of the “army”). But if you told me I could only own one company and I had to choose between a company like Nutanix that has super high margins, high NRR, is growing their subscription business at 30% (likely will be a higher percentage next year), still hasn’t started to see the cost benefit of the subscription renewals, and yet is still selling for 4x revenue, vs. a company like many of ours that are growing at 50-70%+ yet selling for 30-40x+ revenue, I would choose Nutanix without having to even think about it.

I think Nutanix’s stock percentage gains are going to beat most of the other companies we follow over the next year or two. Of course, you and most people on this board feel otherwise. And that’s a good thing that we have lots of different opinions here. Most of the time, the majority of the board is correct and that may very well be the case again here. My gains for 2020 so far have only been half of what many other folks here have had and I have no problem broadcasting that every month. But my own personal conclusion here right now is that I will do really well having so much currently allocated to Nutanix right now.

Time will tell.



“For the record, I didn’t actually “make” Nutanix my top holding, I only bought enough to make it my fifth biggest holding. Mr. Market did the rest and made it my top holding. But I’m comfortable with it remaining there, slightly ahead of Amazon, right now.

Hi Mekong,
Not looking to jump on this and not wanting to put you on defense, but I’m confused how NTNX moves from 5th position in your portfolio to 1st? The move has been good off the bottom but not earth shattering compared to the other names you mentioned. Even AMZN off the March low has had a very big move. Many of the names on the board and the ones most of us hold have had 300% plus moves off the bottom in March.

I also noticed that NTNX was also downgraded Yesterday with major concerns about future visibility and the departure of the CEO. Also not sure why you are calling this a positive development without knowing who’s coming in to take his place. Looks like he was forced out to me with the infusion of capital.

Agreed also that this seems to be a classic case of a setup for a sale.


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Not looking to jump on this and not wanting to put you on defense, but I’m confused how NTNX moves from 5th position in your portfolio to 1st? The move has been good off the bottom but not earth shattering compared to the other names you mentioned. Even AMZN off the March low has had a very big move. Many of the names on the board and the ones most of us hold have had 300% plus moves off the bottom in March.

No problem, I am happy to clarify. I’m not completely sure that I follow your logic. My NTNX holdings increased 80% yesterday, so they nearly doubled. So, in the following example, I’m going to make up numbers and say theoretically these were the value of my 5 biggest holdings as of Thursday

$1,000 AMZN
$900 AYX
$800 TTD
$850 MDB
$650 NTNX

My NTNX increased 80% in one day (as I noted above I had a lot of NTNX call option contracts that more than doubled in value friday, so my NTNX holdings overall went up a lot more than the 29% that the stock increased), so that would make $650 worth of stock rise to $1,170, moving it from fifth to first.

And yes, you’re right, the CEO change is an uncertainty and that naturally brings some risk. But I would bet that Bain would not have put close to a billion dollars into the company if they didn’t already know who they want to install as CEO and run it. Given Dheeraj’s long tenure with the company and the timing of the investment, I’m betting that, as a courtesy, they let him have his farewell in the final analyst call and we’ll soon find out the name of the new CEO. They are a publicly traded company so it makes sense for them to say they are forming a committee and considering multiple candidates to show that the Board members are earning their fees and have a process in place that is watching out for all shareholders, tho in reality, this is probably a formality.

But Bain has done this many times before, and I trust that they have the right pool of available candidates and know who will get the company where it needs to be, and we’ll hear an announcement pretty soon. I think there is enough positive momentum on several fronts that whomever is hired will have a high chance of success. Maybe I’m wrong, but that is what I think is going on.

The company that downgraded NTNX, Baird, set their price target at $25 on Thursday. The stock subsequently rose $6 yesterday from $22 to $28, so that analyst call isn’t working out so well for them so far. Meanwhile at least a couple analysts raised their price targets at the end of the week (Piper Sandler and Steifel to name two that I’ve seen). I don’t really pay much attention to this noise as, who knows what holdings or incentives any given analyst has when it comes to a particular stock.



Woah! This is off topic for a number of reasons. Nutanix is a turn around play, which are off topic for our board. There’s also an options discussion breaking out! Double off topic. Also there’s a portfolio management discussion. Triple off topic! Please, no more posts on this thread.

Also, this brings up some things we can all do to help the board:

  1. Don’t post about off topic companies
  2. If you must post something off-topic, put “OT” in the subject line, and include a bolded I had to get this off my chest, but please, no responses on the board.
  3. If you must respond to an off topic post, do so by email and not on the board.

Not starting off topic threads would be ideal, but continuing to respond to them is what really clutters the board. Let’s all ponder this great post from stocknovice: https://discussion.fool.com/i-also-feel-that-the-noise-on-this-b…

Thank you for your help. Even if you disagree about what kind of posts you’d like to make or see others make here, I think we should all respect Saul’s wishes, in appreciation for what he has built here, and how we have all benefited from it.

Assistant Board Manager


Somehow, a one day spike whose impact on one’s portfolio is based mostly on options doesn’t seem like on topic for this board.

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