Nutanix stock rockets to the best day on record, although analysts warn of uncertainty ahead

The shares of Nutanix Inc. were up 28% on Friday morning and on track for their biggest one-day percentage gain on record, after the cloud computing company exceeded earnings expectations for its last quarter, announced a private equity investment and announced the upcoming pension of its CEO.

Some analysts took a more mixed view of the battle of the company’s announcements, however, arguing that the cash flow is useful, but there are many unknowns in Nutanix’s NTNX,
+ 28.13%

“We think investors (ourselves included) are likely to have to dispel increased uncertainty about yet another model transition / turning point at Nutanix – combined with an announced CEO succession,” wrote Aaron Rakers of Wells Fargo, which shares the same weight. assesses with a $ 27 price target.

Raymond James analyst Simon Leopold said Nutanix “had its share of growth pains, but we did not notice that investors were looking for a new CEO.” Outgoing chef Dheeraj Pandey is one of the founders of Nutanix and helped with the company’s first public offering in 2016.

“As a rule of thumb, we consider unexpected C-level deviations as a risk, but the $ 750 million cash infusion provides compensation” and is the likely reason behind the stock’s large rally, wrote Leopold, who has a rating rating. for Nutanix shares. Bain Capital Private Equity invests $ 750 million in convertible notes with an initial conversion price of $ 27.75 per share.

Read: weekdays stock rallies to record as analysts step price targets on strength in cloud

Jack Andrews of Needham wrote that investors “are particularly encouraged by the capital increase and the changes in sales that should provide significant long-term benefits (particularly improved customer economies), although he argued that the shift” has some uncertainty and potential for volatility creates, like pressure [on] short-term cash flow. ”

He assesses the stock a purchase with a $ 30 target price.

William Blair’s Jason Ader seemed to be one of the most upbeat about the wider suite of announcements.

“We think investors will breathe a sigh of relief from both the solid quarterly results and the inflow of cash that should provide liquidity interests,” he wrote. “While we salute Pandey for the job he has done in building and evolving Nutanix into a billion-dollar plus market leader and company, we think the time is right for a leadership change, especially as the company’s second. decade enters and begins a new direction as a hybrid cloud program vendor with an ACV [annual contract value] subscription model. ”

The company previously focused on total contract value, and Ader wrote that the move to ACV “will be painful in the near future because lower contract duration will negatively impact revenue, bookings, business revenue and free cash flow.” Ultimately, however, Nutanix is ​​optimistic that the transition will mean more predictability in the company and a more frequent cycle of innovations.

Ader has an outperform rating on the stock, which has gained 22% over the past three months as the S&P 500 SPX,
+ 0.25%
is 15% up.