NetApp Poised For 'Continued Outperformance'; BMO Upgrades

NetApp Inc. NTAP impressed investors with its third quarter earnings, with nearly every reported metric exceeding Street expectations. 

The Analyst

BMO Capital Markets' Tim Long upgraded NetApp's stock from Market Perform to Outperform with a price target boosted from $43 to $62.

The Thesis

NetApp's earnings report was "impressive" and highlighted by better-than-expected revenue, gross margin and product margin, among other metrics, Long said in a Thursday note. (See Long's track record here.) 

Perhaps more important, the report emphasizes that NetApp's execution and performance has "improved considerably" as of late and should leave investors with "more confidence in the outlook and sustainability" of the recent momentum, Long said. 

NetApp is also "executing well" on various strategic initiatives to improve the business and also benefiting from the All-Flash market business, which is on track for a $1.7 billion revenue run rate, according to BMO. And NetApp's legacy business has shown itself to be "much less of a headwind," the analyst said.

"While we are a bit late to the story, we still see plenty of runway and believe the setup is favorable for continued outperformance over the next year," Long said. "Going forward, we see continued flash growth, stabilization in the legacy businesses, ongoing gross margin improvements and meaningful opex leverage, with a very attractive valuation."

Price Action

Shares of NetApp were trading higher by more than 15 percent Thursday morning and hit a new 52-week high of $53.89.

Related Links:

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Benzinga's Top Upgrades, Downgrades For November 16, 2017

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