Jefferies Maintains Hold Rating on NetApp (NTAP) Following 4Q Results and 1Q Guidance

Jefferies maintains a Hold rating on NetApp (NASDAQ: NTAP), and lowered the price target to $32.00 (from $37.00), following FQ4 results. NTAP reported revenue of
$1.54B, below the Street's $1.59B estimate. Q4 EPS totaled $0.65, missing Street's estimate of $0.72.

Analyst James Kisner commented on NTAP, saying, "NetApp reported weaker-than-expected FQ4 (April) results and provided even weaker FQ1 (July) guidance. Management blamed product transition issues related to Clustered ONTAP. While we believe there is likely some truth to the company's explanation, we remain cautious given our checks also continue to suggest that NetApp remains in a tough competitive position."

Kisner also added, "NTAP guided FQ1 revenues of ~$1.325B, well below our previous estimate of $1.49B and the Street's $1.46B. The midpoint of revenue guidance implies growth of -14% Q/Q (-11% Y/Y) vs. NetApp's 6-year Q/Q Q1 average of -6% and is particularly disappointing given an extra week in the quarter (14 weeks instead of the typical 13). Q1 EPS guidance calls for ~$0.20-$0.25, below Consensus of $0.60 and our prior $0.58; note, this includes the impact of ~$40M in incremental opex due the 14th week in Q1. The company indicated that transition to Clustered ONTAP was more complex and is taking longer than anticipated; this caused a "dilution of resources" as the sales force focused on transitioning larger accounts (to the detriment of smaller accounts). NetApp is making additional investments in sales to help drive an acceleration in the transition to Clustered ONTAP and a return to Y/Y revenue growth in the second half of FY16."

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 $35.33 yesterday.

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