Goldman analysts, led by Rod Hall, were “driven by the ongoing free cash flow burn and high operating expenses,” they wrote in a report. “We also expect revenue to be significantly impacted by Covid-19, particularly from medium-sized business customers.”
The analysts hold strong to their belief that “Nutanix has a solid technology offering.” But they are “increasingly concerned about its ability to return to revenue growth while reducing operating expenses/sales to maintain adequate cash on the balance sheet.”
Nutanix has underperformed the overall market due to potential impacts from the coronavirus epidemic, the analysts said. Over the past three months, Nutanix has cratered 53%, compared to a 14% slide for the S&P 500.
The Goldman analysts slashed their revenue forecast for Nutanix by 9% for fiscal 2020, which ends July 31, and 17% for fiscal 2021.
They sliced their share-price target to $15 from $47. That’s “70% based on a fundamental valuation of 1.5 times Q5-Q8 enterprise value/sales, and 30% based on a merger and acquisitions valuation of 3 times enterprise value/sales,” the analysts wrote.
When Nutanix released its last earnings report Feb. 26, Chief Financial Officer Duston Williams warned that the company was taking “a more cautious view on business activities in the greater Asia Pacific Japan region due to the anticipated impact of the coronavirus.”
That was before the pandemic truly raged in the U.S.
At last check, Nutanix shares traded at $16.86, down 3.1%.