UPDATE: Susquehanna Upgrades NetApp (NTAP) to Positive

August 18, 2016 7:54 AM EDT
Get Alerts NTAP Hot Sheet
Price: $33.80 -0.59%

Rating Summary:
    10 Buy, 35 Hold, 10 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 25 | Down: 28 | New: 8
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(Updated - August 18, 2016 8:19 AM EDT)

Susquehanna upgraded NetApp (NASDAQ: NTAP) from Neutral to Positive with a price target of $36 (from $25). Analyst Mehdi Hosseini said, following the release of Q1 results and guidance, he has confidence its ability to deliver FY18 revenue growth.

The analyst explained, "As we noted in our 8/16 preview, we outlined a case where we could get constructive if we saw sustained traction of NTAP's All-Flash Strategy, and Clustered ONTAP (cDOT) penetration - and the Jul Q results and call gave us what we needed. Specifically, our upgrade is predicated on: 1) increased conviction in NTAP's ability to deliver FY18 Revenue growth - driven by reasonable growth and market share assumptions for NTAP's All Flash portfolio (FY17-FY18 CAGR of ~90%), as well as conservative assumptions behind cDOT penetration (FY17-FY18 CAGR of -3%), 2) our belief that NTAP possesses additional room for Opex reductions - which in the context of FY18 Rev growth, leads to operating leverage, 3) based on Rev growth and Opex control, we model FY18 EPS of $2.90, which implies material upside to Consensus of $2.44 - even with a modest Y/Y decline in FY18 Gross Margins given the competitive pricing environment."

Hossein added, "Moreover, we contend that NTAP's sizable installed base and attractive valuation can be enticing for a large global player - such as Cisco - that may be interested in solidifying its converged solution offering (especially given the Dell/EMC merger, and HPE's focus on converged solutions), while also possessing an attractive All-Flash portfolio."

For an analyst ratings summary and ratings history on NetApp click here. For more ratings news on NetApp click here.

Shares of NetApp closed at $28.85 yesterday.

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