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Why Nutanix Stock Jumped 29% Last Month

By Jeremy Bowman – Updated Sep 2, 2020 at 9:48PM

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A better-than-expected earnings report helped lift the cloud infrastructure company.

What happened

Shares of Nutanix (NTNX 1.39%) surged last month after the cloud-based hyperconverged infrastructure specialist posted better-than-expected results in its fourth quarter earnings report and announced an investment from Bain Capital. According to data from S&P Global Market Intelligence, the stock finished the month up 29%.

As you can see from the chart below, all of those gains came from the post-earnings surge.

^SPX Chart

^SPX data by YCharts

So what

Revenue in the quarter rose 9% to $327.9 million as the company continues its transition to a subscription model, creating some lumpiness in its results. Still, that figure beat estimates at $320 million, and its annual contract value run rate rose 29% to $1.22 billion, which may be a better measurement of the business's growth.

A bar chart made of clouds going upward

Image source: Getty Images.

On the bottom line, its adjusted loss per share narrowed from $0.57 to $0.39, beating estimates at $0.67. The company also announced a $750 million investment from Bain Capital in convertible debt to support its growth initiatives, marking an endorsement from a respected tech investor.

In a surprising move, Nutanix also announced that CEO and Co-Founder Dheeraj Pandey would step down once the company found a replacement.

Commenting on the quarter, Pandey said, "I am thrilled to report strong results to close the year, a performance all the more impressive given the uncertainty of the global market environment we are facing today."

Now what

On its earnings call, management explained that the company was shifting from giving guidance around total contract value (TCV) to annual contract value (ACV) as it has nearly completed its transition to a subscription model and ACV is now a better measurement of its performance. The shift also corresponds with a change in incentives for its sales reps, who had been giving discounts on longer contracts and will now be incentivized to sell shorter contracts at full price.

For its fiscal first quarter, Nutanix expects ACV run rate to grow at least 20% and called for ACV billings of $118 million to $121 million.

The shift to ACV will have negative effects on billing and revenue, but with that decision, a change at the CEO position, and the Bain investment, Nutanix appears to be starting a new era. Based on what investors heard in the report, the company appears to be off to a good start.

Jeremy Bowman owns shares of Nutanix. The Motley Fool recommends Nutanix. The Motley Fool has a disclosure policy.

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