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Piper Jaffray Sees Increased Competition In Storage Devices Space; Downgrades EMC, NetApp


In two separate reports issued Monday, Piper Jaffray analysts Andrew J. Nowinski and Ryan R. Bergan downgraded shares of EMC Corporation (NYSE: EMC) and NetApp Inc. (NASDAQ: NTAP) from Overweight to Neutral ratings. Both companies' stocks responded negatively to the demotions.

The EMC Downgrade

Nowinski and Bergan also lowered their price target on EMC from $30 to $27. The demotions were mainly based on the increasing competitive pressure that the company is facing. Next-gen storage vendors (particularly Pure Storage) and public cloud providers could both have a “meaningful impact on revenue and earnings growth.”

Related Link: Research And Markets: Client Server News – Weekly Newsletter Covering Cloud, Big Data And The Internet Of Things

While the analysts see EMC standing in a “more defensible position than NetApp,” they also point out that other vendors (like Nimble, Tegile, Tintri, Pure Storage and Nutanix) are taking pieces of EMC’s installed base, gaining market share in detriment of EMC.

The firm also reduced its estimates to reflect their “concerns regarding the increasingly competitive market, migration of data to public cloud providers and the further weakening of the euro.” Their fiscal 2015 estimates are largely unchanged and in line with consensus. But, their estimates for fiscal 2016 were trimmed due to management’s revised earnings outlook provided at the company’s Strategic Forum.

Raymond James now expects EPS of $1.98 for 2015, and $2.10 for 2016 – down from a previous estimate of $2.25.

Related Link: Top 4 Large-Cap Stocks In The Data Storage Devices Industry

The NetApp Downgrade

Same as in EMC’s case, NetApp was downgraded due to the intensifying competitive pressure from next-gen storage vendors and public cloud providers. The analysts think that “NetApp will be forced to increase investments in Sales & Marketing in order to offset this pressure, which will result in a significant reduction in earnings growth over the next two years.”

Consequently, they lowered their revenue and EPS estimates for fiscal 2016 and fiscal 2017 modestly below consensus to reflect these concerns. They now project EPS of $2.78 on revenue of $6.175 billion for 2016 and EPS of $2.92 on revenue of $6.275 billion for 2017.

Latest Ratings for EMC

Sep 2016TerminatesBuy
Aug 2016MaintainsHold
Jul 2016DowngradesOutperformMarket Perform

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Posted-In: Andrew J. Nowinski Nimble Nutanix Piper JaffrayAnalyst Color Downgrades Price Target Analyst Ratings


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