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NetApp's Worst Is In The Rearview Mirror, Credit Suisse Says

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NetApp's Worst Is In The Rearview Mirror, Credit Suisse Says

NetApp Inc. (NASDAQ: NTAP) took a “critical first step” on its path to recovery in the fiscal second quarter, according to Credit Suisse.

The Analyst

Credit Suisse’s Matthew Cabral maintained an Outperform rating on NetApp, while raising the price target from $60 to $70.

The Thesis

NetApp is beginning to show signs of recovery, after a challenging start to the fiscal year, Cabral said in the note.

The company recorded strong earnings of $1.09 per share for the fiscal second quarter, beating the consensus expectation of 94 cents per share. At $1.37 billion, revenue missed expectations by a tiny margin.

Gross margins were significantly better than expected, while operating margin improved in the first second quarter, Cabral noted.

Management has guided to fiscal third-quarter revenue of $1.47 billion, in-line with the Street estimate, and earnings of $1.18 per share at the mid-point, at tad higher than Street expectations of $1.17 per share.

The earnings guidance appears conservative for both fiscal third quarter and full fiscal year 2020, the analyst mentioned.

Saying that he expects product revenue to stabilize going ahead, Cabral wrote, “While the choppy macro backdrop remains an overhang that’s largely unchanged, NetApp’s execution within the Americas in particular began to improve from the significant shortfall in F1Q.”

The analyst raised the earnings estimates for fiscal 2019, 2020 and 2021 from $4.05 per share to $4.33 per share, from $4.77 per share to $5.07 per share and from $5.33 per share to $5.52 per share, respectively, mainly to reflect higher gross margins.

Price Action

Shares of NetApp had risen more than 4.53% to $62.79 at the time of publishing on Thursday.

Latest Ratings for NTAP

DateFirmActionFromTo
Nov 2019MaintainsNeutral
Nov 2019MaintainsOutperform
Nov 2019MaintainsUnderweight

View More Analyst Ratings for NTAP
View the Latest Analyst Ratings

Posted-In: Credit Suisse Matthew CabralAnalyst Color Earnings News Price Target Reiteration Analyst Ratings

 

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