On Thursday, UBS began coverage on Nutanix (NASDAQ:NTNX) stock, a leader in hyperconverged infrastructure software, with a Buy rating and a price target of $81.00. Currently trading at $64.78 with a market capitalization of $17.36 billion, the stock has analyst targets ranging from $71.12 to $90.
The firm's analysis suggests that Nutanix is well-positioned to capture a significant portion of the market disrupted by a recent VMware (NYSE:VMW) acquisition. This disruption is seen as an opportunity for Nutanix to reach an annual recurring revenue (ARR) estimate of $3.1 billion by FY27, which is above the consensus estimate of $3.0 billion.
UBS's positive outlook on Nutanix is also based on the company's strong standing in the hyperconverged infrastructure software segment. The company has demonstrated solid performance with 14.86% revenue growth and impressive gross profit margins of 85.44%.
This market is anticipated to continue its double-digit growth over the next few years, further supporting Nutanix's business prospects. The firm's coverage initiation reflects confidence in the company's ability to maintain its market leadership and capitalize on industry growth.
Additionally, UBS notes that while public cloud infrastructure providers are increasingly receiving a larger share of IT budgets, the demand for on-premise data center investments will persist. This enduring demand is seen as beneficial to Nutanix, as the company is increasingly able to support hybrid and multi-cloud environments. The firm's analysis indicates that the current market dynamics present a favorable backdrop for Nutanix's offerings.
The UBS report highlights the potential for Nutanix to benefit from approximately $400 million of the available $5 billion market opportunity. This potential arises from the disruption caused by the VMware acquisition, which Nutanix is poised to capitalize on. The firm's coverage presents a strong case for Nutanix's growth trajectory and market opportunity.
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