An Update on a Few of Our Stocks

Rough day out there as we write this. Dow down 140 and the S&P 500 down 20 or 0.8%.

Nutanix (NTNX: $22.40) is having a good day. It’s at the top today of all of the stocks we follow, up 3%. Just think what a good day it would be having if the market were up 140 points instead of down 140. This stock is a winner that just hasn’t been realized yet. But note that if it had been discovered, the stock would be at $40 or higher where is ought to be.

Firsthand Technology Value Fund has disclosed that Nutanix is one of its top five positions. The fund is a small fund - $140 million – but they have put 7% of the entire fund into Nutanix. That’s $10 million.

Nutanix is a provider of hyperconverged data center equipment that merges computing, storage, and networking capabilities in a single piece of equipment. More businesses are looking to adapt the technology, with 18% of chief information officers saying they expect to move to hyperconverged systems in the next two years, according to a survey by Goldman Sachs. Goldman added the stock to their conviction list, saying it has an estimated 50% return potential to their $31 price target.

Last quarter Nutanix said it gained 800 new customers, with 20 global companies buying more than $1 million in hardware or software. The larger deals helped push overall sales growth to 67%. The company got some big name wins in the quarter, including corporate giants such as Caterpillar, Kyocera, Société Générale and Sprint. One undisclosed customer win was a retailer with $50 billion in sales in the U.S.

The company’s leadership in the space, including the combination of hardware and software it offers, makes it a “once-in-a-decade tech infrastructure story,” wrote Goldman. They see Nutanix on a path for long-term double-digit growth, high gross margins and large operating leverage.

Despite its leadership in the space, the stock is down 15% year-to-date. “The stock drop and Nutanix’s unique position in the space, however, make it a prime acquisition target,” Goldman said.

BMR Take: We like this company. Growth in revenues always wins out in the end.

Shopify (SHOP: $95) and Twilio (TWLO: $31) are both up slightly today too, even as the market is not having a good day. That sends us a strong message of confidence.