I am suspicious of the 90+ promoter score. It is done by a third party neutral agency that would have no motive for hyping Nutanix as they do this promoter score for practically all major technology companies and most major companies in general, most of which are larger than Nutanix.
There is an inherent bias in these scores as one can give a selection bias sample to be interviewed, but if that was so, why does not every company do this? Probably because this promoter score is truly a third party neutral who does their job properly to create an objective score.
Nutanix has grown like mad. Literally from 0 in 2010 to 8000 enterprise customers (many the largest in the world) standardizing at least part of their data center on Nutanix.
I still have not reconciled the inability to monetize this success with the net promoter score. That is my real issue in the end with Nutanix. The other is that much of its future is aspirational, “visionary” stuff. Their current business has demonstrated the efficacy of their land and grab model. Get in the account, and the account buys multiples thereof fro their initial purchase. Such a model should demonstrate real earnings leverage. But we have seen very little in regard to earnings leverage.
Given alternatives, and my conservatively aggressive nature pinned in by tax considerations (you know, it is absolutely true if the marginal tax rate were lower I would do more trading and thus pay more in taxes, but is what it is) I have invested in other companies that have futures that are not as aspirational but have similar growth trajectories, less competitive threats, demonstrated cash printing ability, and valuations that are underestimating the future prospects of the company. It has become difficult to make the cut with me.
However, I can indeed see the appeal. Me of say 18 months ago, yeah I would have owned a lot of it after the stock crash. I’ve just become much busier, more passive, and more risk adverse (although that would not be the impression I think from many - but self-perception).
Obviously however I do find following the company enjoyable. Much of what it does however is amorphous, and I have a feeling that its lack of earnings leverage may be related to that. Most B2B companies are profitable if they are dominant businesses, and profitable from an early stage. SaaS companies have been an exception to this usual rule, and Nutanix is a SaaS enabling technology and following the land and grab SaaS strategy, thus its lack of profitability despite it being a B2B company would be consistent with the SaaS strategy that some companies like Salesforce have found to be very successful and is of course the strategy deployed by SHOP.
Twilio has become my example of what not to buy because it demonstrates no ability to have a sufficient CAP to enable it to print cash some day. Thus, absent some change in its fundamentals its story will not lead to long-term great returns. I have not followed it close, but ZEN may be similar in inability to eventually monetize their customer base unless something changes. But Nutanix, it may be something different. But honestly all I can say is I cannot exactly tell, but I will put it in the category that it might, and if so, it has multiples of growth ahead. If not, the market will take care of it soon enough when the next severe shake up occurs. This past two weeks was not it. A real shake out takes those companies like Twilio, that are story stocks, but have an inability to eventually produce cash, and turns their billion dollar market caps permanently into low to mid hundred figure million market caps. That sort of shake out has not occurred.
With some luck it will not occur in the next few years either, but we shall see.
Tinker