Tech Stock Slapped With a Morgan Stanley Downgrade Before Earnings

Nutanix is set to report earnings this Thursday, May 30

Deputy Editor
May 28, 2019 at 12:25 PM
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Data-storage concern Nutanix Inc (NASDAQ:NTNX) is suffering at the hands of Morgan Stanley today, down 5.1% at $33.36, after the analyst downgraded the shares to "equal weight" from "overweight" and cut its price target to $37 from $53. Morgan Stanley attributed the downgrade -- which comes just days before the tech firm's May 30 earnings release -- to sector headwinds and "increasing competition." Further, the brokerage firm thinks the company's "turnaround will take longer than the two to three quarters assumed by investors."

The downgrade isn't too surprising, based on NTNX's recent behavior on the charts. In fact, the stock gapped more than 30% lower after Nutanix's most recent earnings report. It bottomed at an annual low of $32.52 not long after, and subsequent rebound attempts stalled around the equity's 60-day moving average. Today's tumble has NTNX shares flirting with new-low territory again. 

NTNX May 28

Looking at the security's past eight post-earnings moves, however, it appears that Nutanix has moved lower the day after three earnings reports. On average, NTNX moved 9.9% following the last eight earnings, regardless of direction. This time around, the options market is pricing in a much bigger swing, though, at 20.8%. 

More analysts could start following Morgan Stanley's lead, should NTNX once again drop after earnings. Despite its struggles on the charts of late, the security still boasts 10 "buy" or better ratings, compared to six "holds" and only one "sell." The stock's consensus 12-month price target still hangs high above its current perch, too, at $46.47 -- a premium of about 41% to the shares' price now. 

Conversely, short sellers have already been circling the stock, with short interest up 21.5% in the last reporting period. The 4.1 million shares sold short represent a healthy 7.2% of the stock's available float. 

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