BMO Capital Cuts Price Target on NetApp (NTAP) Following Mixed 3Q Results
BMO Capital maintained a Market Perform rating on NetApp (NASDAQ: NTAP), and cut the price target to $24.00 (from $32.00), following the company's 3Q earnings report. NetApp reported mixed results, with revenues missing expectations, but with better margins. Revenues of $1,386 million declined 4% q-q and 10% y-y and were below BMO's $1,463 million estimate and consensus of $1,454 million. Competition in the storage market remains intense, leading to aggressive pricing and market share losses for NTAP. Growth in all flash arrays was a highlight, more than tripling year over year.
Analyst Tim Long commented, "NTAP reported a mixed January quarter, with a revenue miss and better margins. Guidance for the April quarter is lower on the top and bottom lines, reflecting a challenging storage end market. Management gave some more insight into the mix change between strategic, growth businesses and mature, legacy ones. The 26% growth in strategic areas was not enough to offset the 44% decline in legacy products. Management announced a 12% headcount reduction to better align costs with the challenging market backdrop. Given the weaker outlook and factoring in the SolidFire acquisition, we are lowering our EPS estimates to $2.19 from $2.37 for FY16 and to $2.31 from $2.60 for FY17."
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Shares of NetApp closed at $23.55 yesterday.