William Blair Says NetApp (NTAP) Getting Less Worse, But Still has Ways to Go

August 18, 2016 6:15 AM EDT
Get Alerts NTAP Hot Sheet
Price: $35.56 -1.03%

Rating Summary:
    10 Buy, 35 Hold, 11 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 11
Trade NTAP Now!
Join SI Premium – FREE

Get instant alerts when news breaks on your stocks. Claim your 2-week free trial to StreetInsider Premium here.

William Blair affirms NetApp (Nasdaq: NTAP) with an Underperform rating following Q2 results issued Wednesday night.

Analyst Jason Alder commented today, NetApp topped consensus on the top and bottom lines by $33.6 million and $0.10, respectively, and guided the fiscal second quarter roughly in line with consensus, despite a constrained macro and IT spending environment. Management highlighted progress in the business's transformation, as strategic products (mostly Clustered Data ONTAP and all-flash arrays) contributed to 61% of product revenue (same as a quarter ago) and grew 24% year-over-year, while the mature portfolio (mostly OEM and ONTAP 7) declined 24% (versus a 40% decline in the previous quarter). Overall product revenue was roughly flat year-over-year—the best performance in 12 quarters—though this was against a very easy comparison and guidance for next quarter implies a double-digit year-over-year decline in product sales. Looking ahead, management expects strategic products to drive moderate revenue growth in fiscal 2018 (as mature solutions become less of a headwind), though we continue to model a moderate revenue decline. While NetApp is managing expenses well, product gross margin continues to be challenged, and we see significant execution risks ahead as competition intensifies in all-flash storage, and as cloud-based and hyperconverged alternatives encroach on the traditional storage market. We would need to see more evidence of product revenue growth together with stability in product gross margin before revisiting our rating.

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

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In

Related Categories

Analyst Comments, Analyst EPS View

Related Entities

William Blair

Add Your Comment