Why Shares of Nutanix Slumped Today

MarketsMotley Fool

What happened

Shares of Nutanix (NASDAQ: NTNX) were down about 12.4% at 3:30 p.m. EST Monday. There was no company-specific news affecting the hyperconverged-infrastructure company. Instead, a steep stock market sell-off seems to be the culprit.

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So what

The Nasdaq Composite was down nearly 2.6% 30 minutes before market close. That decline dragged down plenty of high-flying tech stocks, including Nutanix.

Not helping the cause is Nutanix's optimistic valuation. The company was valued at nearly $8 billion before Monday's slump, which works out to a price-to-sales ratio of nearly 7. Nutanix is not even in the ballpark of being profitable, losing $330 million on a GAAP basis on $1.2 billion of revenue over the past 12 months.

The company's subscription business is growing quickly, with subscription revenue more than doubling on a year-over-year basis in the latest quarter. But that rapid growth hasn't saved Nutanix from the ongoing stock market sell-off.

Now what

Nutanix reported its fiscal first-quarter results in late November, beating analyst estimates for both revenue and earnings. A bounce in the stock was short-lived. Nutanix is now down about 40% from its all-time high, and there could be more pain ahead if the stock market continues to slump, regardless of the quality of the company's quarterly results.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Nutanix. The Motley Fool has a disclosure policy.