NetApp's (NTAP) Price Target Reduced to $33 at FBN
FBN Securities maintained a Sector Perform rating on NetApp (NASDAQ: NTAP) price and lowered its price target to $33.00 (from $38.00). Analyst Shebly Seyrafi noted that clustered ONTAP disruption and other factors are hurting near-term results.
Seyrafi explained, "The company is pointing to two key factors that explain the reported and guided weakness: disruption from the movement to cloud and disruption from the transition to Clustered ONTAP. Regarding the latter, NTAP notes that it underestimated the disruption, particularly for Americas Commercial customers (where revenue declined by 8% Y/Y), as these customers defer hardware purchases until they can better plan for the process changes and downtime windows. Additionally, NTAP is seeing many of its smaller customers, which are often partner led, pause as some partners are not well-versed in selling Clustered ONTAP due to insufficient training. These factors are leading to a weak pipeline currently."
"We believe, however, that there are other factors hurting NTAP’s results and outlook," continued the analyst. "These include strong competition from newer players such as Pure Storage and Nimble Storage, migration of IT dollars away from storage toward security (Datalink just noted this), and continued strong competition from EMC (which gained 1pp Y/Y of relative share in CQ1 while NTAP lost 1pp of share – see Figure 6). Although the company is guiding for operating margins to return to the targeted 18-20% range in FH2, we see this as very difficult to achieve, even with its announced 4% (500) headcount reduction action."
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.