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Nutanix Reports Significant Y/Y Increase in Canada Customers

Nutanix Inc. NTNX recently reported a massive 75% year-on-year increase in its Canadian customer base at the end of fiscal third quarter 2017. Customer count increased from 179 to 313.

During the same time period, the number of large deals also increased and the company’s enterprise cloud offerings saw investments of more than a million from customers. “We have been very aggressive in building the velocity placements necessary to go after that mid-enterprise account set,” said Robert Yelenich, who joined as the head of operations in Canada in spring 2016.

Per Nutanix, a major federal agency of the Canadian government signed a multi-million dollar deal with the company between Apr 2016 and Apr 2017. This strengthened its customer base that includes the likes of Transat A.T., Nexen Energy ULC, Empire Life, AccorHotels.

We believe, the expansion of its customer base will boost the top line going forward. Notably, shares of the company have underperformed the Zacks IT Services industry on a year-to-date basis. While the industry gained 12.6%, the stock lost 29.7% over the same time frame.

Key Growth Catalysts

The scalability of Nutanix’s infrastructure models has been one of the driving forces behind the large scale adoption of the company’s solutions. Moreover, the availability of native language speaking customer support is another positive for the company.

In the last reported third-quarter 2017 results, revenues increased 67.2% year on year to almost $191.8 million. The rise was driven by respective 59.1% and 96.6% growth in product and support & other services revenues to $143.1 million and $48.6 million. The revenue figure was higher than management’s guided range of $180–$190 million.

We note Nutanix’s recent cloud partnership with Alphabet GOOGL will expand its presence further in the sector. Also, the cloud network enhancement collaboration with Aviatrix, which deals with the seamless operation of augmented private and public cloud connectivity, will help it in deeper market penetration. These will work in the company’s favor going forward.

Zacks Rank and Stock to Consider

Currently, Nutanix carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology space are Applied Materials, Inc. AMAT, ON Semiconductor Corp. ON both sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term growth rate for Applied Materials and ON Semiconductor is currently projected to be 16.6% and 16.7% respectively.

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