Susquehanna Cuts Price Target on NetApp (NTAP) Following Announced SolidFire Acquisition
Susquehanna maintained a Neutral rating on NetApp (NASDAQ: NTAP), and cut the price target to $31.00 (from $32.00), following the company's announced acquisition of SolidFire. Susquehanna sees the acquisition to be an intriguing addition to NTAP's existing portfolio. However, given that NTAP already possesses two other All-Flash Array (AFA) products, the AFF and EF-Series, the company plans to utilize SolidFire as yet another tier of AFA systems, not as a replacement of AFF and EF-Series.
Analyst Mehdi Hosseini commented, "We view the announced acquisition of SolidFire ($870M in cash) to be an intriguing addition to NTAP's existing portfolio. Specifically, we've been very vocal about the growth in the AllFlash Array market (~30% CAGR '15-'20), as well as the growth in scale-out solutions - and interestingly, SolidFire sits at the intersection of both secular trends by offering a scaleout AFA solution. However, given that NTAP already possesses two other All-Flash Array (AFA) products - the AFF (traditional Enterprsie Infrastructure customers) and EF-Series (application-centric customers) - the company plans to utilize SolidFire as yet another tier of AFA systems (next-gen data center use-cases), not as a replacement of AFF and EF-Series. As such, it remains to be seen how NTAP will be able to execute on its three-pronged approach to the AFA market in a focused manner, while also managing opex to support profitability. Key lateral takeaways include: 1) the deal supports our out-of-consensus Negative view on PSTG, given that NTAP will be better positioned in the AFA market, raising the bar even higher for PSTG, and 2) media reports that EMC, Cisco, and Samsung were interested in SolidFire suggest to us that further consolidation could be on the horizon - and given NMBL's attractive hybrid technology and upcoming AFA release, we believe it could be on the short list."
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Shares of NetApp closed at $27.60 yesterday.