Jefferies Downgrades Nutanix, Says Cloud Company Is Trading At Fair Value

Nutanix Inc (NASDAQ: NTNX) shares have soared 155 percent in the past year, prompting Jefferies to downgrade the cloud stock. 

The company is scheduled to release fiscal fourth-quarter results after the market close Aug. 30.

The Analyst

Analyst John DiFucci downgraded Nutanix from Buy to Hold with a $60 price target.

The Thesis

The success achieved by Nutanix over the past year is adequately reflected in shares, although more success is likely to come, DiFucci said in a Friday note. (See the analyst's track record here.) 

Jefferies updated its estimates to reflect Nutanix's upwardly revised operating expenses guidance. 

Notwithstanding the guidance revision, Nutanix said it would maintain its rule of 40 expectations for software revenue growth and the free cash flow margin.

Nutanix is in the process of transitioning its business toward a pure software model, eliminating the sales of pass-through hardware, DiFucci said. 

"We have always viewed Nutanix as a software business and believe that the transition will ultimately benefit the company," the analyst said. 

"However, like all transition stories, the model has become more difficult to forecast."

The Price Action

Nutanix shares were sliding 5.75 percent to $52.46 at the time of publication Friday.

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