Technology Stocks

Pivotal Software Inc. (NYSE:PVTL) Bottoms Out On Strong Q3 Financial Results

A 30% year-over-year revenue growth supplemented by a narrower than expected net loss might as well be the catalyst that will reinvigorate Pivotal Software Inc. (NYSE:PVTL) prospects.  The stock is languishing near all-time lows, after plunging from record highs of $29 a share.

Pivotal Software Price Analysis

The delivery of solid Q3 earning looks set to strengthen the stocks sentiments in the market. Analysts have already started taking note of the stellar performance depicted by positive ratings as well as share price target.

After a steep pullback, Pivotal Software appears to have encountered a strong support level at the $17 a share level. The stock has since formed a double bottom at the support level, from where it is trying to make a comeback.

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For the stock to emerge as a bounce-back play, it first needs to rise and stabilize above the $20 a share mark, a critical resistance level. Above the critical resistance level, buyers could come in and push the stock back to 52-week highs. The stock looks sets to bounce back, given the impact of Q3 financial results on investor’s sentiments.

Solid Q3 Results

Pivotal Software is the subject of renewed investor interest on announcing a 30% year over year increase in revenues that came in at $168.1 million. The figure beat consensus estimates attributed to higher subscription revenues. Subscription revenues were up 59.9% to $100.8 million.

During the quarter, the company benefited from strong sales in its cloud-native platform as well as strong demand for its strategic services. The financial results underline the fact that the company has a scope to expand its customer base further while capitalizing on the ongoing transition to private cloud and public workloads within enterprises.

In response to the stellar performance in Q3. Pivotal Software expects its subscription revenues to increase to between $109.5 million and $110.5 million in Q4. Total revenues, on the other hand, should come in between $169 million and $171 million.

Analysts Estimates

Positive ratings from analysts in Wall Street is another catalyst that continues to strengthen Pivotal Software sentiments in the market. Wedbush analyst Daniel Ives believes the stock has the potential to rally back to the $25 a share mark after the recent showing. The analysts maintains an ‘outperform rating on the stock.

“We continue to believe PVTL is uniquely positioned, as applications are becoming the face of the business, digital channels are omnipresent, and application developers are dictating infrastructure technology decisions,” said, Mr. Ives

Credit Suisse analyst Brad Zelnick also maintains an outperform rating with a$25 a share price target on the stock. Nikolay Beliov of Bank of America has initiated coverage of Pivotal Software with a neutral rating and price target of $25 to $22.

Bottom Line

Pivotal Software remains well positioned to benefit from the digital disruption facing many enterprises. A surge in cloud-native spending points to accelerate subscription revenue growth going forward.

Subscription revenue increasing overtime is another development that looks set to continue strengthening investor’s confidence in the stock. The company has already delivered an above-consensus Q4 guidance in anticipation of robust growth going forward.

While the stock has underperformed for the better part of the year, the same might not be the case going forward. Strengthening underlying fundamentals depicted by stellar financial results is a development that should continue strengthening the stock’s sentiments in the market.

For early movers looking to gain some exposure in the native cloud computing business, Pivotal Software looks like an ideal pick. The stock looks set to continue delivering solid financial results expected to go a long way in triggering a bounce back in the market.

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