2018-09-18 10:26:52 | Nutanix rises after analysts call selloff 'excessive', 'overblown'Shares of cloud computing software company Nutanix (NTNX) are rising after analysts called the recent selloff of shares on Google (GOOG, GOOGL) competition concerns "excessive" and "overblown." GOOGLE COMPETITION: On Monday, The Information reported that Google Cloud is building custom-designed hyperconverged infrastructure solutions for "a handful" of large customers to run in private data centers. The devices are the latest indication of Google's increasing focus on cloud products that run under the direct control of corporate customers, the report said. The Information noted that it is not certain whether Google will take the extra step and sell such devices to a broader range of customers, though doing so would signal a shift in the company's cloud strategy for attracting Fortune 500 customers. SELLOFF 'EXCESSIVE': Following the report, Piper Jaffray analyst Andrew Nowinski noted that Nutanix shares dropped 11.5% Tuesday. The analyst said while the potential Google offering could be viewed as competitive to Nutanix, most enterprises will choose to leverage a multi-cloud infrastructure and would not want to be locked into single cloud provider. Nowinski added that he believes the integration between Google and Nutanix is still being developed and is on track and noted that the article states that Google is not commercially developing the product for all customers. He said he viewed the selling pressure as "excessive" and reiterated an Overweight rating on Nutanix with a $66 price target. FEARS 'OVERBLOWN': William Blair analyst Jason Ader also noted the fall in shares of Nutanix following The Information report in a Tuesday research note titled "Fears of Google Entering HCI Space Look Overblown to Us." Ader said the product is likely Google's response to what Microsoft (MSFT) has built with Azure Stack, which is Microsoft's HCI product that connects directly into its Azure public cloud service. He said he believes that if Google turns the product into an actual packaged HCI product sold to a broad range of customers, it could create longer-term risk for Nutanix. However, the analyst thinks investors should consider that this appears to be another validation of the staying power of the on-premises market, which he said bodes well for Nutanix. Further, he pointed out that if Google were to decide to enter the HCI market more broadly, it would have a long way to go to establish itself in the enterprise against entrenched players like Nutanix and VMware (VMW). Google has not had great success selling into the enterprise historically and has little experience selling enterprise infrastructure appliances, Ader wrote. The analyst said he expects Nutanix to "remain best-of-breed" and reiterated an Outperform rating on Nutanix. PRICE ACTION: Nutanix is up nearly 8% to $50.08 in morning trading. | |
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