The shares of Nutanix (NTNX) are rallying after Goldman Sachs added the stock to its Conviction List and called the company a potential takeover target. The firm added that the company is "a once-in-a-decade tech infrastructure story," while its results are poised to beat consensus estimates in "coming quarters."

POSSIBLE TARGET IN HIGH-GROWTH MARKET: Calling hyperconvergence "the biggest trend in IT since public cloud," Goldman analyst Simona Jankowski estimated that Nutanix has a roughly 30% share of the $2B hyperconvergence market, which she predicted would grow to $20B in a decade. Meanwhile the stock's 30% drop so far this year and the lack of similar companies makes a takeover of Nutanix "increasingly likely," the analyst stated.

RESULTS OUTLOOK POSITIVE: Nutanix's strong fundamentals and an accounting change it's making should enable the company to report strong results, wrote Jankowski. Later this year, Nutanix's switch to new accounting rules that will allow it to recognize software revenue up front should significantly boost its results, Jankowski believes. Goldman's checks indicate that adoption trends for hyperconverged infrastructure in general and Nutanix specifically have been strong, according to the analyst.

COMPETITIVE ADVANTAGES: A number of Nutanix's advantages over its competitors should enable it to retain its market share over the longer term even as competition in its category heats up, Jankowski stated. Specifically, while the hypercoverged solutions of Cisco (CSCO) and HP Enterprise (HPE) can only work on their servers, Nutanix's products can work on a number of third party servers, the analyst noted. Additionally, Nutanix's system works with several hypervisors, including its own, free hypervisor, enabling users to avoid paying for VMware's (VMW) product, thereby saving them as much as 30%, according to Jankowski.

TARGET: The analyst set a $31 price target on the stock, but she believes that the shares can rise more than 50% above her target.

PRICE ACTION: In morning trading, Nutanix rose 7.5% to $21.79.