NTAP dada

Given that NetApp Inc. NTAP reported its Q4 results below expectations with the forward guidance below the consensus and the estimates, D.A. Davidson’s Mark Kelleher believes that the stock was likely to be pressured going forward.

Kelleher reiterated a Buy rating on the company, while lowering the price target to $35.

The analyst mentioned that NetApp’s revenue growth is likely to continue to be impacted by “a sluggish macro economy as well as continued headwinds of product transition the company is working through.”

Q4 Results

In addition, higher spend on customer incentives to transition to Clustered ONTAP led to a decline in gross margins during Q4.

Strategic Solutions, including NetApp’s Flash products and Clustered Data ONTAP, accounted for 61 percent of the revenue for the quarter, up from 55 percent in Q3. Mature products accounted for the remaining 41 percent of the revenue.

SolidFire Contribution

With the SolidFire acquisition having been completed in February, Kelleher stated that SolidFire “adds a ‘scale-out’ all-flash solution to NTAP’s product portfolio, allowing it to compete in the hyper-scale and cloud data center market.”

The analyst noted that while the acquisition might not contribute much to the revenue, it did increase NetApp’s cost structure while SolidFire’s revenues ramp.

Kelleher believes that the stock offers an attractive value investment opportunity, while pointing out, “With additional investments in sales capacity and channel education, we believe the company should be able to move towards overall top-line growth by fiscal 2018.”