Are you guys still confident with NTNX?
Can the IT experts help the rest of us understand the ongoing pressure downwards?
Thank you,
HP
4 Likes
I don’t think the downward pressure has anything to do with IT.
They are still in midst of a transition to software, which makes the y/y numbers confusing.
They still have some new solutions that have received a lot of visibility but aren’t materially impacting their revenues yet, like Xi. (cloud DR)
They still have the stench of IT hardware, which tends to get multiples more in-line with traditional storage companies.
They ran up rapidly from earlier in the year.
Market has been tough on many “tech growth stocks” lately.
I like the company a lot, and if other companies I liked more weren’t also down a lot, I probably would be all over the stock.
But I don’t think you have any market makers out there pushing the stock down because they question a particular feature of Nutanix’s hyper-converged (HCI) offering…nothing IT-ish out there in my mind. Just business/market issues.
Dreamer
16 Likes
As usual, I agree with Dreamer.
I’ve written about NTNX extensively, so I’ll just cross-post something I wrote a few days ago.
One slight update to #2 below: I listened to the Q&A from their Nutanix Files call, which was really boring and interesting at the same time. The two big takeaways: 1) this is a crowded but extremely large enterprise space ($10-20b TAM), and they feel they can/are capturing clients that aren’t current/potential HCI clients. This is just another example of the innovation pace and optionality they are building. 2) And maybe I’m reading into this too much because I’m biased, and I am, but the question was asked about Files working with Xi, and after saying yes, one of the presenters got a little flustered, and said you will hear more about this on the next call. But sounded like they are going to do a GA announcement/call in advance of earnings.
Either way, the quiet period starts at the end of Oct, so the insider selling pressure (Frame) should subside, we should get an announcement about Xi, and earnings report should be very strong. I don’t like to make time-based predictions, but Nov/Dec should be very strong.
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I have to say, I think NTNX is one of those once a year opportunities, which balances a “reasonable” valuation and hyper-growth. Same thing with TWLO and TTD recently, I had to ask myself what am I missing here? What does the market see that I’m not? And oftentimes the market is just plain wrong. Or impatient. Or missing hidden growth.
After a few weeks of heavy research, I’d sum up the “reasons” in four main points:
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Technical reasons. Each quarter on the 15th options are granted which triggers heavy selling and usually declines. This may have been compounded this year with the Frame acquisition and additional insider selling. Also, there was horizontal support around $38. Once it broke $50, and the market tanked too, it was somewhat destined to retest that level (look at chart in early 2018 and late 2016).
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Concern with Xi release. Although the release date hasn’t been pushed back from the last investor day, I’m sure the market is antsy about it. This is a game changing product. If it does what they claim, look out. Rocket ship here we come. This is also the area where the “market” may know more than we do, which gives me the most pause. However, this is truly a huge TAM that is not fully baked into analysts’ forward estimates.
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Innovation risk. Too many products. Which again, seems like the opposite of a problem to me. Also, DaaS (Frame) is a huge TAM in its own right, if they can really develop a great product this is another large opportunity not baked into the price.
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And I think this is the biggest reason institutional investors haven’t stepped in: a combination of hidden growth (revenue vs. billings and deferred rev growth), and the fact that they have tough revenue comparisons YOY for the next 2-3 quarters. So impatient investors or robo algorithms may have just decided to move on. But similar to TWLO, once these wash out, I believe this is an easy 2x in 12 months. And probably a 3-4x if they execute in next 24 months.
As always, just my opinion. Please do your own research.
Stephen
30 Likes
“I had to ask myself what am I missing here? What does the market see that I’m not? And oftentimes the market is just plain wrong. Or impatient. Or missing hidden growth.”
What the shorter term blinders on Wall Street sees is that all these high fliers pretty much are showing the exact same pattern right now.
Since recent highs the chart pattern shows a rollover and a downtrend.
Does it matter to longer term investors? Only if you want to buy or add to your shares.
If you do, I’d buy in thirds as to me it looks like these all have a ways to go downward.
NTNX has led on the way down, so I thought 39 might hold. Apparnetly not.
TWLO on the other hand I would maybe buy at mid 60s with an expectation that it could go down to the low 50s, or its 200dma.
Either way, short term these stocks are trending downward, which I see as an opportunity to build a position.
Chris
10 Likes
I’m very high confidence in Nutanix. Not just because of all the positive reasons we have explored over the last year and not only because the reasons for street despondence easily debunked but for another reason as well that really does not get talked about much on this board - Dheeraj Pandey.
I think this guy is a complete rock star CEO and whilst Sarah Friar is good and has a keen following on this board, Dheeraj is in another league and under-appreciated as a factor for investing in Nutanix. There’s only a few CEOs/Chairmen I see in that class across my holdings…
Jack Dorsey - Square
Richard Kinder - Kinder Morgan
Jayshree Ullal - Arista
Steve Schwarzman - BX
and amongst those I own but indirectly:
Satya Nadella - Microsoft
Jeff Bezos - Amazon
and those that I don’t own but wish I did:
Warren Buffet - you know who
with possible considerations amongst my holders and honourable mentions going to:
Jeff Green - The Trade Desk
Nikesh Arora - Palo Alto Networks
Sanjay Mehrotra - Micron
Ant
11 Likes
Ant,
You have a great point, while Dheeraj seems great to me, I didnt realize anyone will put him the same list as Buffett, Bezos, Nadella or even Dorsey for that matter.
Would you mind elaborating on your reasoning? I will also do some digging and share what I learn.
BTW - I am very impressed with Jay Chowdhary, Zscaler CEO and his background and how he got to where he is today. Yet to dig more about Jay as public company CEO but I think he too company public just so employees and VCs cash out. He is still holding large (~50% if remember right) chunk of the company.
Also, listening to Elon Musk biography, very interesting to say the list.
It is interesting you mention Sanjay Mehrotra - I saw him at BITS Alumni event last week and came out extremely impressed. I will try to learn more about SanDisk history. If he is anywhere near as enterprenural as the rest of the list you have, this is the best moment to buy Micron… however, i need to study a little bit before making that conclusion.
1 Like
You have a great point, while Dheeraj seems great to me, I didnt realize anyone will put him the same list as Buffett, Bezos, Nadella or even Dorsey for that matter.
Would you mind elaborating on your reasoning?
nilvest
People can read this article on Dheeraj background and maybe that might begin helping people decide for themselves. I had posted this previously on the paid Fool Nutabix board:
This would be a old article from around the time Nutanix IPO’d in 2016 that gives the background on the Nutanix CEO. I did not look back and see if someone posted it before but even if someone has maybe this article will be brought to the attention of new people to the Nutanix story. CEO & Co-Founder Dheeraj Pandey is a immigrant from India and has a interesting story. He came with $900 in his pocket and built Nutanix to what it would be today.
By Jayadevan PK, factordaily.com
A little over a month ago, Dheeraj Pandey took his seven-year-old company, Nutanix, public. On September 30, Nutanix (NTNX) made a stunning debut on the Nasdaq stock market, opening at $26.50, 66% above its IPO price of $16 per share. The public market now values the enterprise cloud solutions company at over $3 billion.
In 1997, Pandey had packed his bags from India and left for the US with a paltry $900 in his pocket, part of the amount he’d received from two educational trusts in India as scholarships to study abroad. At the current valuation, Pandey’s stake (9.2%) in Nutanix is valued close to $300 million.
cont’d
https://factordaily.com/interview-dheeraj-pandey-nutanix-clo…
Starrob
6 Likes
thanks Starrob, yes I was this one.
1 Like
Hi Nilvest
Yep I rate Elon as a complete genius as well and up their but I didn’t want to drag the merits of Tesla onto the board. As genius though he has his foibles and some.
Other CEOs I have also rated as exceptional historically were:
Vivek Ranadivé - former Tibco founder and CEO
https://en.wikipedia.org/wiki/Vivek_Ranadivé
and who Vivek reminded me of…
Robert Pera - Ubiquiti Networks
A lot of these CEOs have something in common besides being a certified genius.
- They were often the founders with plenty of skin in the game
- They often had repeated success stories
In the case of Dheeraj, my reasoning was founded on the fact that:
- His communications are free of management bu11sh1t, are honest and humble - he actually answers questions
- He boils down complex tech discussions into very understandable and easily followable and crystal clear communications
- He demonstrates an understanding of his industry and marketplace superior to any that I have heard in recent times
- His communications to me also demonstrate he is more on top of his own business and corporation than any CEO I have heard and is prepared to divulge a whole lot more than most about the internal business mechanics and moving parts (which is very shareholder friendly)
I compare this with other CEO communications that for the majority sound the same, fail to answer questions and but for the use of the corporate name could be an interchangeable ER call with any other corporation listed in the US and at worst are: deliberately obfuscating, descriptively delusional in their perception/reality gap, subversively preventing YoY compares with reorganisations, relabelings, creative accounting and ineffective M&A and blatantly name drop hot valuation buzz words (like: “big data”, “AI” and “cloud based”) without any resemblance to the business itself (I’m thinking about several of my former employers and more businesses besides that I care to mention).
I think a few others have also picked up on Dheeraj as well and I know that Jeff Green and Robert Pera have fans on this board but I don’t think the Nutanix CEO factor has been recognised enough in this case.
Ant
15 Likes
Thank you Ant… thats an excellent observation to share.
really appreciate.
Part of the downswing in NTNX share price is the recent news that IBM is supposedly now a competitor. I’ll believe that when I see it.