Here’s Why Nimble Storage (NMBL) Shares Are Up Over 50% YTD

Nimble Storage Inc. (NYSE: NMBL) shares were up 46.28% on Tuesday, March 7, 2017, on heavy trading volume. Market participants exchanged over 50M shares on Tuesday, while NMBL’s average daily trading volume was 1.77M shares, according to Yahoo Finance. The stock was up 58.84% YTD and 49.23% over the past quarter.

Here’s a quick look at Nimble Storage’s performance:

Nimble Storage

Notice the large gap up between March 6, 2017 and March 7, 2017. Hewlett Packard Enterprises Co. (NYSE: HPE) indicated it would buy Nimble Storage for $1.09B in cash, and consequently, NMBL traded significantly higher. In addition to that news, NMBL announced its earnings results on March 7, 2017. However, markets did not seem to care about its earnings results.

HPE Could Pay Over $1B for Nimble Storage

The flash storage market is growing, and consumers seem to have a demand for the product. Hewlett Packard Enterprises wants to expand into this market. According to IDC, it estimated the overall flash market to be worth around $15B in 2016, and expects it to grow to $20B by 2020. However, HPE may have found it more costly to build a division from the ground up than purchasing a company with the infrastructure laid out already. That in mind, HPE said it would purchase Nimble Storage Inc. for over $1B in cash.

HPE CEO Meg Whitman shifted her focus on new areas such as tech, networking and storage services after it was spun off from Hewlett-Packard Co. The $1.09B deal was based on NMBL’s shares outstanding of approximately 87.5M as of Nov. 30, 2016. In addition to the $1.09B in cash, HPE agreed to pay out or take on NMBL’s unvested equity awards, valued at approximately $200M at the close.

That said, NMBL shares hit 15-month highs after the announced news of HPE offering $12.50 for NMBL common shares.

Some analysts realized Nimble Storage was prime for a buyout offer. Susquehanna Analyst Mehdi Hosseini told investors NMBL’s prospects as a takeover candidate shouldn’t be overlooked.

Nimble Storage Earnings

Nimble Storage also announced its fourth quarter and fiscal year 2017 on Tuesday. This made the case for HPE’s $1.09B offer. During Q4FY2017, Nimble Storage grew its revenues by 30% year over year. However, the company operated at a loss of 41 cents per basic and diluted share. For the fiscal year 2017, it had a net loss of $1.85 per basic and diluted share, and a total revenue of $402.6M.

Nimble Business Highlights

Here are some of the business highlights from Nimble Storage’s earnings release:

  • Introduced Nimble Cloud Volumes, the First Multicloud Storage Service. Nimble Cloud Volumes is the only enterprise-grade multicloud block storage service for running applications in Amazon Web Services (AWS) and Microsoft Azure. This service will enable the next wave of applications – traditional transactional workloads – to be moved to the cloud with enterprise-grade availability and data services.
  • Achieved Six-Nines Availability Powered by InfoSight Predictive Analytics. This is a new standard for uptime in the infrastructure industry. This level of availability translates to an impact of fewer than 25 seconds annually, empowering IT staff to focus on business priorities instead of routine maintenance with an infrastructure that gets smarter every single day.
  • Nimble All Flash Arrays Awarded the 2016 Product of the Year Award by Storage Magazine/ SearchStorage.com. The AF-Series All Flash arrays won the Gold award and were named as the All-Flash Systems Product of the Year. Moreover, the CS-Series Adaptive Flash arrays were also recognized with the Silver award in the Disk and Hybrid Systems category.
  • InfoSight Wins 2016 Technology Leadership Award from Ventana Research in IT Analytics. Nimble Storage end user Flexi-Van Leasing was recognized for its use of InfoSight. The Ventana Research award identifies businesses and IT leaders who are using technologies and applying best practices to create the best possible outcomes in productivity, performance and support of an organization’s goals and objectives.
  • Bob Kelly Appointed to Nimble Storage Board of Directors. Mr. Kelly serves as a member of the nominating and corporate governance committee. Mr. Kelly is a General Partner at Ignition Partners. He most recently served as the Corporate Vice President of Merger & Acquisition Strategy and Business Development for the Cloud and Enterprise Division at Microsoft Corporation.
  • Vice President of Worldwide Channels Named a 2017 CRN Channel Chief. Leonard Iventosch was recognized on this annual list that represents top leaders in the IT channel who excel at driving growth and revenue in their organizations through channel partners.

The Bottom Line

HPE just offered to buy Nimble Storage for $1.09B in cash, and consequently, NMBL shares rose over 40% on March 7, 2016. HPE made the offer in an attempt to expand into the flash market, which could be worth $20B by 2020.

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