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Why Nutanix Stock Got Crushed Today

By Evan Niu, CFA - Mar 9, 2020 at 2:14PM

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Coronavirus fears are causing tech stocks to sell off, shortly after Nutanix warned that the outbreak would hurt results in Asia.

What happened

Shares of Nutanix (NTNX 3.34%) have gotten crushed today, down by 10% as of 2:20 p.m. EDT. Investors are worried about the ongoing novel coronavirus outbreak, and a major drop in oil prices further rattled financial markets. The hybrid cloud platform operator recently warned that the virus that causes the COVID-19 respiratory illness would impact results.

So what

While many tech companies that have supply chain operations in China are facing heightened exposure, those risks don't directly apply to Nutanix. Instead, demand for Nutanix's offerings in its Asia-Pacific-Japan (APJ) segment is being adversely impacted. The company recently reduced its guidance for total contract value (TCV) for fiscal 2020 due to a faster-than-expected transition to subscriptions combined with "a more cautious view on business activities in the greater APJ region due to the anticipated impact of the coronavirus."

Red stock chart going down

Image source: Getty Images.

Now what

Nutanix's current guidance assumes that the outbreak's economic effects will not spread to other geographical segments. The company is also pausing planned hiring activities in response to the crisis, which will yield some cost savings.

"Based on our current outlook, both the Americas and EMEA regions seem to be in a good position to deliver their expected results for the second half of fiscal 2020," CFO Duston William said on the earnings call last month. "This, of course, assumes that the business interruptions in the APJ region from the coronavirus does not spread to these regions, too."

TCV billings in fiscal 2020 are now expected to be $1.6 billion to $1.67 billion, down from a prior forecast of $1.65 billion to $1.75 billion.

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