Nutanix (NTNX) has seen a surge in interest from investors as it recently became one of the most searched stocks on Zacks.com. Over the past month, the company has recorded a modest return of +1.1%. This outperformance comes against the backdrop of a broader downward trend for the market, as the Zacks S&P 500 composite registered a decline of -7.5% during the same period. In contrast, the Zacks Computers - IT Services industry, which includes Nutanix, has seen a more significant downturn of 12.1%. Given this performance, many investors are asking: what lies ahead for Nutanix?
One key to understanding the potential direction of Nutanix's stock lies in the revisions of earnings estimates. At Zacks, the primary focus is to assess changes in earnings projections, which are pivotal in determining a company’s fair stock value. Analysts often look closely at how estimates are adjusted in response to recent business trends. An increasing earnings estimate generally reflects a positive outlook and can lead to a higher stock price. This connection can be illustrated by empirical research indicating a strong correlation between trends in earnings estimate revisions and stock price movements.
Nutanix is slated to post earnings of $0.36 per share for the current quarter, representing a year-over-year change of +28.6%. Notably, the Zacks Consensus Estimate has seen a drastic increase of +985.7% in the past 30 days, indicating a substantial upward outlook from analysts. Additionally, for the current fiscal year, the consensus earnings estimate stands at $1.59, reflecting a year-over-year change of +21.4%, with a +25.7% increase in estimates over the last month. Looking ahead, Nutanix's consensus earnings estimate for the next fiscal year is $1.86, indicating a +16.8% change from prior year expectations, with a +5.6% increase over the past month. Such improvements are significant and indicate a robust earnings forecast.
As a testament to these positive trends, Nutanix holds a Zacks Rank #3 (Hold). This rating is influenced by the dramatic changes in consensus earnings estimates, along with three additional related factors. The Zacks Rank effectively reflects the changes in analysts' earnings estimates and provides a clearer perspective on short-term stock performance.
Switching gears to another stock that has been making headlines, Airbnb, Inc. (ABNB) is also featured prominently on Zacks.com's searched stocks list. Unfortunately, its shares have faced a steep decline, returning -20.2% over the previous month. This is notably worse than the Zacks S&P 500 composite's -7.5% shift and the 15.6% loss seen in the Zacks Leisure and Recreation Services industry during the same timeframe. Given this backdrop, many are pondering the future trajectory of Airbnb.
Just as with Nutanix, earnings estimates play a crucial role in assessing the potential of Airbnb. Over the current quarter, Airbnb is expected to post earnings of $0.26 per share, denoting a drastic decrease of -36.6% year-over-year. In the last month, the Zacks Consensus Estimate for Airbnb has remained static, underscoring a stagnation in analyst outlooks. For the current fiscal year, the consensus earnings estimate stands at $4.32, indicating a slight increase of +5.1% from the previous year, but it has only increased by +0.3% in the past 30 days. Looking to the next fiscal year, the consensus estimate of $5.01 implies a +16% change from last year’s expectations, with a +0.7% increase over the past month.
Revenue growth is equally significant, as it serves as the backbone for sustainability in earnings. Airbnb's consensus sales estimate for the current quarter is projected at $2.26 billion, indicating a year-over-year change of +5.6%. Looking towards the current and following fiscal year, consensus estimates are $12.23 billion and $13.55 billion, reflecting increases of +10.1% and +10.8%, respectively. This signifies that despite potential short-term struggles, Airbnb is still expected to experience revenue growth.
When Airbnb last reported its earnings, it posted revenues of $2.48 billion, marking an 11.8% increase year-over-year. Its earnings per share (EPS) for that period was $0.73, which, while lower than last year’s $0.76, exceeded the Zacks Consensus Estimate of $2.42 billion by +2.47%. Additionally, the EPS surprise beat expectations by +25.86%. Over the past four quarters, Airbnb has outperformed consensus EPS estimates two times and has exceeded consensus revenue estimates three times, indicating an ability to adapt and perform in various market conditions.
However, investors should pay close attention to stock valuations as well. A critical aspect of efficient investment decisions involves ensuring that a stock’s price reflects its intrinsic value and growth potential. Current metrics such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) ratios are essential in comparing a company’s value against its historical performance and the broader industry. Under the Zacks Style Scores system, Airbnb has been rated a D in valuation, which indicates it is trading at a premium compared to its peers. This could suggest caution for potential investors.
In closing, both Nutanix and Airbnb illustrate the importance of earnings estimates and stock valuations while navigating the current market landscape. It remains to be seen how these stocks will perform as analysts continue to reassess their forecasts and adjust accordingly. As market conditions change, investors should remain vigilant and informed.
