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NetApp Faces 'Structural Concerns,' Credit Suisse Fears

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In a report published Thursday, Credit Suisse analysts maintained their Neutral rating on NetApp Inc. (NASDAQ: NTAP). The price target was lowered from $40 to $31. The company posted disappointing results, with weak sales and lower than expected EPS.

In addition to the weak results, the company's guidance was also a cause for concern, given that it indicated a fundamental decline. "We are becoming concerned that continued mixed execution and ongoing product transitions could be masking structural issues residing in the competitiveness of their offering," the analysts said.

NetApp's revenue guidance indicates that product growth is expected to decline further in FY16/17. According to the management, the weakness is driven by the customer transition to Clstered ONTAP, which requires planning and increased costs, and has led to a pause in spending. All this has impacted the company's ability to go after new wins.

"We do believe the pace of deceleration is surprising and we note NetApp's performance suggests share loss," the analysts stated, while adding, "We remain concerned about slow industry growth, competitive share loss, and weak product roadmap."

The analysts also expect NetApp to witness margin pressure, driven by negative operating leverage as well as weakening gross margins. In addition, while the stock is currently inexpensive, the analysts expressed their concerns regarding the company's long-term positioning and execution. There is unlikely to be any meaningful upside to the stock.

Latest Ratings for NTAP

DateFirmActionFromTo
Nov 2016Maxim GroupDowngradesBuyHold
Nov 2016Drexel HamiltonUpgradesHoldBuy
Nov 2016OTR GlobalDowngradesMixedNegative

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Posted-In: Credit SuisseAnalyst Color Price Target Analyst Ratings

 

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