Due to realignment of analyst coverage, we are withdrawing coverage of the following equities: AAPL, ANET, CSCO, DELL, FLEX, HPE, HPQ, IBM, JBL, JNPR, NTAP, NTNX, and PSTG. Our final ratings, price targets, and estimates should no longer be relied upon.
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NTNX reported F1Q20 EPS yesterday after the close, posting a $0.04 beat vs. cons of $(0.75). A 4% beat on subscription revenue in the quarter coupled with a better than expected implied 2Q guide were enough to send the stock up 22% in the aftermarket. Amidst a coverage group with topline pressure (recently compounded by macro), we prefer any name with secular growth optionality. The past two quarters have helped to reestablish credibility for NTNX. Some might pick at the investment ramp when the balance of the coverage proceeds cautiously, but we choose to see the decision as evidence of conviction behind the plan and dollars being deployed opportunistically. Reiterate outperform.
We detail our quarterly VAR survey, where we queried 51 value-added storage resellers globally in October for business in July-September. We provide both industry and company level results and walkthrough the stock related takeways.
NTNX reported F4Q19 earnings after the close yesterday (08/28/19) posting a $0.07 beat vs. consensus $(0.64). Against the backdrop of significant forward revenue guide misses in 2Q/3Q, an inline forward 1Q revenue guide helped to send the stock up 22% in the aftermarket. Also well received was the inline revenue guide for F20—the first time management has provided full-year guidance—which includes additional drag from timing/deal mechanics from subscription shift. NTNX cleared a hurdle with this print, but the focus will rightfully turn back to when it can generate sales leverage and whether a return to 30%+ growth can happen exiting F20.
VARs see overall IT budget spend likely growing, albeit in the low single digits. One reseller mentioned that business had a sudden stepdown entering July. Another touched on global uncertainty; European deals stepped up CIO supervision in 70% of cases, leading to 20% uptick in sales cycle length. Overall, VARs recognize that 2018 provides a tough compare for enterprise spending, potentially exacerbated by recent signals of weakness, but they continue to see IT capture a larger share of overall corporate budgets.
We surveyed 50 value-added resellers of storage in the US, Europe, and APAC. The survey was taken in July, asking about April-June business though we may have picked up some July views. Takeaways include (1) the outlook for overall IT spending in 2019 improved over last quarter; (2) storage spending stepped down sequentially with nearly 75% reporting fair/ok sales strength; (3) NTAP’s outlook worsened vs. the prior period, while DELL sales and outlook remained steady (4) discounting ticked down across our coverage with DELL & PSTG seeing the largest changes.
John Treadway has worked with large enterprises considering both private and public cloud implementations, first at Cloud Technology Partners, which was acquired by HPE, and now at Symphony Solutions, where he is CEO. Although hyperscaler revenue growth is moderating, he argues it is mostly due to tough comparisons as cloud approaches $70bn of revenue. He says AWS’s Andy Jassy might be right that only 3% of workloads are in the cloud by dollars.
In addition to tracking the five major tech sectors—Hardware, Semis, Software, Internet, and Services—we have added 2-3 subsectors for each for greater granularity. We show their performance in our weekly Wolfebytes.
AWS gains decelerated from 41% in 1Q to 37% in 2Q and Microsoft from 73% to 64%, still solid results that suggest workloads continue to move to public clouds and capex should improve in the second half. Google Cloud’s stated $2bn includes G Suite. We don’t have history from the company, but our estimates suggest a doubling YoY as Thomas Kurian begins to triple its salesforce. Full-year growth for the top four should be about 40%. We are hosting cloud consultant John Treadway Tues at 2pm.
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