Nimble Storage Inc (NYSE:NMBL): Favorable Risk Reward Ratio

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Favorable analyst comments accompanied by a rating upgrade had Nimble Storage Inc (NYSE:NMBL) zipping higher yesterday on strong volume of 7.54 million shares.

The stock closed 7.89% higher at $8.75.

Nimble is a leader in predictive flash storage technology that combines flash performance with flash and cloud based predictive analytics.

Nimble Storage Inc (NYSE:NMBL) upped by Wells Fargo

Wells Fargo analyst Maynard Um raised his recommendation on Nimble from Market Perform to Outperform.

The analyst cited a favorable risk reward ratio given that the stock had not priced in the expected growth, as well as the fact that management was being conservative about its guidance. According to Um Nimble was “a company with the potential to grow revenue at or near 30% y/y.”

Um also said stable gross margins, effective organizational changes and the company’s InfoSight predictive analytic engine were other positive factors considered in his analysis.

The analyst raised his valuation range of Nimble from $9-$10 to $10-$11.

Nimble Storage Inc (NYSE:NMBL) had a strong Q2

Last month Nimble Q2 EPS of $-0.19 which beat estimates by $0.01, and revenue of $97.1 million which was up 21.2% year-on-year and beat by $2.41 million.

The company’s All Flash Arrays (AFA) appeared to have met with impressive customer response.

CEO Suresh Vasudevan said: “We saw strong momentum in customer and channel partner adoption of our All Flash arrays. Our AFA bookings accounted for 17% of our total product bookings in Q2FY17, up from 9% in Q1FY17. During our first full quarter of having All Flash arrays in our portfolio, we added 133 AFA customers, including 79 “new to Nimble” customers, with deal sizes substantially above our overall average.”

Technically, Nimble’s weekly chart shows the stock is building a base in the range of $5.00-$10.00 with higher lows. The price is showing positive upside momentum given that it is positioned 13% above the 200 day SMA.

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