Nutanix's (NTNX -0.57%) sales execution issues have crushed its stock this year. The cloud computing provider has admitted that it has failed to pull the right strings to boost sales, and investors are justifiably concerned.

However, with the share price down nearly 40% in 2019 as of this writing, and with Nutanix asserting that it can deliver stronger growth in the upcoming year, now might be a good time to invest in the stock. But is that a risk worth taking given the challenges the company has faced in recent months?

Representative image of computers connected to the cloud.

Image Source: Getty Images.

The problem with Nutanix

Nutanix began pivoting toward a software-centric business model near the end of 2017, and the transition is one of the things that put pressure on its revenues. Management admitted during the last earnings conference call that it had led to "a 5% to 10% compression in [the] top line." That's natural -- it now gets a sizable chunk of its income from subscription payments that are spread out over long periods, as opposed to selling hardware, where the revenues are booked up front.

More specifically, subscriptions accounted for 65% of Nutanix's revenue in its fiscal third quarter, an increase of 24 percentage points from the year-ago period. Its overall subscription revenue of $168 million was up 110% annually, and the average subscription contract length stood at 3.7 years.

Despite the impressive growth in Nutanix's software revenue, overall revenue was down slightly year over year thanks to the decline in hardware and product sales.

On the other hand, Nutanix has admitted that the company's lead-generation efforts have fallen short of expectations Nutanix experienced strong growth in its sales pipeline in a couple of quarters last year, despite flat spending on generating new leads, but after reallocating funds away from lead generation, things fizzled.

Some analysts also take the view that a key source of Nutanix's sales growth troubles is the increasing strength of its competition.

However, there are several concrete signs that point toward a coming revival for Nutanix, so savvy investors should consider the current share price weakness as a buying opportunity.

Why Nutanix can bounce back

The first reason investors shouldn't dismiss the chances of a turnaround at Nutanix is because of the impressive growth in its subscriptions business last quarter. What's more, the company's deferred revenue increased 55% year over year to $838 million.

The fact that Nutanix's deferred revenue grew at a faster pace than its overall revenue is a positive sign. The rapid growth in this metric indicates that the company has been able to sell a good number of subscriptions despite its challenges. And it closed 50 deals worth more than $1 million during fiscal Q3

Also, investors shouldn't forget that Nutanix's move toward a software-centric model has helped boost its gross margin significantly since the beginning of 2018.

NTNX Gross Profit Margin (TTM) Chart

NTNX Gross Profit Margin (TTM) data by YCharts

Management believes that the efforts to improve sales execution will start bearing fruit in the next fiscal year, which began this month. The company says that it is busy boosting its sales pipeline "by doubling down on lead generation and increasing our focus on sales hiring and execution." If these efforts work, the stock should climb out of the trough it has been in this year.

Investors would do well to take a close look at Nutanix's next quarterly report This company is sitting on some solid catalysts that will drive its growth in the long run.