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On Tuesday, Loop Capital Markets adjusted its price target for NetApp (NASDAQ:NTAP) shares, bringing it down from $130.00 from the previous $150.00. Despite the reduction, the firm maintained a Buy rating on the company’s stock. This decision follows NetApp’s latest earnings report for the January quarter, released on the previous Monday, which showed a year-over-year revenue increase of 2% to $1.64 billion. This growth marked the fifth consecutive quarter of year-over-year revenue and billings increase for NetApp. With a market capitalization of $19.47 billion and trading near its 52-week low, InvestingPro analysis suggests the stock is currently undervalued, with analyst targets ranging from $110 to $153.
The primary factor contributing to NetApp’s revenue growth has been the performance of its all-flash storage solutions, which saw a 10% increase year-over-year. The company’s annualized revenue run-rate for this segment has hit $3.8 billion. Additionally, NetApp has been successful in securing over 100 wins in AI infrastructure and data lake modernization, indicating strong demand for AI-driven workloads. As a prominent player in the Technology Hardware, Storage & Peripherals industry, NetApp maintains impressive profitability metrics, with a gross profit margin of 70.62% and overall revenue growth of 5.29% over the last twelve months. For deeper insights into NetApp’s financial health and growth potential, check out the comprehensive Pro Research Report available on InvestingPro.
NetApp’s storage-as-a-service platform, Keystone, demonstrated significant growth, nearly 60% year-over-year, indicating its strong market traction. Furthermore, the company’s public cloud revenue grew by 15% compared to the same period last year, with its first-party and marketplace cloud storage services experiencing a surge of well over 40%.
In terms of product development, NetApp has refreshed its All-Flash FAS (AFF) and C-series product lines and introduced new mid-range ASA systems, which are already witnessing strong adoption rates. Looking forward, NetApp anticipates continued momentum in all-flash storage growth and an acceleration in public cloud services. However, the company is also considering the impact of the Spot divestiture and foreign exchange headwinds.
NetApp is focusing on enhancing sales execution and implementing cost controls to improve the efficiency of deal closures and to ensure more predictable revenue streams in the upcoming quarters. The company’s financial stability is further reinforced by its consistent dividend payments, maintained for 13 consecutive years, with a current yield of 2.17%. Trading at a P/E ratio of 18.48, NetApp shows strong value potential relative to its near-term earnings growth. InvestingPro subscribers have access to 15 additional exclusive ProTips and detailed financial metrics that provide comprehensive insights into NetApp’s market position and growth trajectory.
In other recent news, NetApp Inc. reported its third-quarter fiscal year 2025 earnings, revealing a mixed performance. The company achieved an earnings per share (EPS) of $1.91, slightly surpassing the forecast of $1.90, yet its revenue of $1.64 billion fell short of the anticipated $1.69 billion. This shortfall was primarily due to delayed deals and adverse foreign exchange rates, which notably impacted the international public sector. Despite these challenges, public cloud revenue increased by 15% year-over-year, and the company maintained a strong operating margin of 30%.
NetApp’s guidance for the upcoming period also fell below expectations, influenced by the divestiture of its Spot business and ongoing foreign exchange issues. Citi analysts responded by lowering their price target for NetApp from $135 to $110, maintaining a Neutral rating on the stock. The projected Product Gross Margin for the fourth quarter is anticipated to be around 56%, with management expecting pricing actions and lower NAND pricing to positively impact future margins.
The company remains optimistic about its long-term prospects, citing strengths in Advanced Software (ETR:SOWGn) Architecture and new product developments in Flash and Artificial Intelligence. NetApp’s CEO, George Kurian, expressed confidence in the company’s position as a supplier of choice for AI and data-driven workloads, despite the recent earnings miss. The company continues to focus on improving execution and maintaining robust operating margins in the coming quarters.
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