NetApp Shares Up Following Earnings; What do the Analysts Say?

NetApp, Inc. NTAP released its fourth quarter and fiscal year 2014 results Wednesday. The company was able to obtain a better than expected EPS despite missing on revenues. This was achieved by exceeding guidance for both gross and operating margins which came in at 64.4 percent and 20.9 percent respectively. NetApp also announced it will increase its dividend by 10 percent to $0.165 per share. Despite NetApp's solid results, a number of analysts seem to think the waters are still too murky to upgrade the stock. Instead, they are maintaining the equivalent of a Neutral position while they wait for clarity to come at the company's Analyst Day on June 24th. Speaking on the Analyst Day presentation, Barclays analysts wrote, "We believe the company will need to address how its products can continue to compete in a software-defined world." Another issue causing concerns among analysts is the company's declining OEM revenue. Macquarie analysts explained NetApp management has provided weaker than expected guidance due to "conservatism around the declining OEM business and a weak IT spending environment." Looking to possible growth strategies, Wells Fargo analysts are in favor of management seeking positive M&A deals. These analysts believe, "M&A that can leverage NTAP's channel presence would be a good use of cash and prefer it over dividend increases and share repurchases."