Analysts: Buy the FAANG-Induced Dip on This Stock

Piper Jaffray called Monday's sell-off "excessive"

Sep 18, 2018 at 11:31 AM
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The shares of Nutanix Inc (NASDAQ:NTNX) plunged 11.6% yesterday on reports Alphabet's (GOOGL) Google Cloud services could soon be available to private data centers. However, NTNX stock is trading up 7.1% today at $49.71, after a pair of analysts called the reaction overdone and suggested the sell-off created an attractive entry point on the tech shares.

In a note entitled, "Unfounded Media Rumors Create Buying Opportunity," Needham reiterated its "buy" rating and $71 NTNX price target -- a 43% premium to current trading levels -- and made note of a previously announced partnership between Nutanix and Google. The analyst also suggested traders should buy the dip on the "stock price dislocation."

Echoing this, Piper Jaffray said it thinks "most enterprises will choose to leverage a multi-cloud infrastructure and would not want to be locked into single cloud provider," and that "the selling pressure attributed to this report is excessive." The brokerage firm underscored its "overweight" rating and $66 price target on NTNX stock.

More broadly, most analysts are upbeat toward Nutanix, with 13 maintaining "buy" or better ratings, compared to four "holds," and one "strong sell." Plus, the average 12-month price target of $62.95 represents expected upside of 26% to NTNX stock's current price.

This optimism has been echoed in the options pits, as well. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 8.54 ranks in the 72nd annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

Looking at the charts, it's not too hard to see why Wall Street is upbeat toward NTNX. Year-over-year, the cloud stock has more than doubled, and is up 40% in 2018. And while the shares have been choppy in recent months, they've consistently found a foothold in the $46-$48 neighborhood -- with the latter currently home to their 200-day moving average -- which helped contain yesterday's sell-off.

ntnx stock daily chart on sept 18

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