October 25, 2017
Nutanix (NTNX: $27.40) has been on fire lately, moving up from $23 two weeks ago to $28 yesterday. It has fallen 50 cents today as the market is getting hit hard. We wondered why the stock was doing so well and then found out that Fidelity Management & Research loves the company. They have disclosed ownership of 20.3 million shares of Nutanix, representing 19.65% ownership of the company. In May they had 14.8 million shares, showing an increase of 37% in 3-4 months. Wow.
In our many years on the Street we haven’t seen anything quite like this. We’ve seen these big mutual fund companies owning 2% of a company and even 5%, but 20%? We just can’t remember anything like this.
Our Take – two things: 1) They must be reading The Bull Market Report. Smile. And 2) This is really good news. Listen, we love this company and expect big things ahead. Revenues last quarter were up 61% from the previous year - $226 million vs. $140 million, and that was up 18% sequentially from the previous quarter. This is just stellar in our book. But their Selling/General/Admin expenses are way too high, causing them to be in the negative profit-wise, but remember, this is a company banking on the future. With $350 million in cash and no debt, we’re not worried. We’re willing to give them a year to bring profits to the bottom line to go along with this company that is shooting for $1 billion in revenue for their fiscal year ending July 31st, 2018. That’s right around the corner.
But because of the no-profit situation, expect the naysayers and sellers to cause volatility in the stock before it reaches our Target of $30 and our ultimate Target of $50 or higher.