UBS cuts NetApp stock price target to $108 from $115

Friday - UBS has adjusted the price target for NetApp (NASDAQ:NTAP) shares to $108 from the previous $115, while maintaining a Neutral rating on the company’s stock. The revision follows NetApp’s recent financial performance disclosure, where the company reported a revenue of $1.73 billion in the fourth quarter, surpassing UBS’s projection of $1.70 billion and resulting in a modest earnings per share (EPS) beat. NetApp’s EPS came in at $1.93, slightly higher than UBS’s estimate of $1.87 and the Visible Alpha Consensus (VA Cons) of $1.89. According to InvestingPro data, NetApp currently trades at a P/E ratio of 18.12x and appears slightly undervalued based on Fair Value analysis. The company maintains a strong market position with a market capitalization of $20.48 billion.

The strength in NetApp’s earnings is partly attributed to a robust 14% year-over-year growth in all-flash array annual recurring revenue (ARR), suggesting that NetApp continues to gain market share from competitors like Pure Storage (NYSE:PSTG). InvestingPro analysis shows the company has maintained strong financial health with an overall "GOOD" rating, supported by impressive gross margins of 70.19% and revenue growth of 4.85% over the last twelve months. Despite this positive, the company’s cautious revenue outlook for the first quarter of fiscal year 2026 (Q1:26) has been noted, which is anticipated to be below consensus expectations. The guidance for Q1:26 indicates a growth of approximately 1% year-over-year, adjusting for the sale of the Spot asset, and falls about 3% short of UBS’s estimates.

NetApp’s gross margin (GM) guidance of 71-72% is a positive factor, yet the EPS guidance of $1.48 to $1.58, although in line with UBS’s estimate of $1.51, is nearly 7% below the VA Consensus of $1.64. Additionally, the initial full-year 2026 (FY26) revenue guidance, adjusted for the Spot divestiture, forecasts a growth of 2% to 6%, which is approximately 100 basis points slower than the mid-point market expectations. Although strong gross margins are expected to drive the EPS guidance to $7.60-$7.90, outperforming UBS’s estimate of $7.38 and the VA Consensus of $7.68, there is a debate among investors whether the gross margins are peaking, given the conservative revenue growth outlook.

The tempered revenue outlook comes amid a volatile market environment influenced by proposed tariffs and the appointment of a new Chief Financial Officer at NetApp. While UBS acknowledges that there is potential for revenue growth above the guidance, particularly with the 14% increase in all-flash ARR, the market is expected to adopt a cautious stance, waiting to see how the situation unfolds, especially with the revenue outlook tempering the positive margin forecast. InvestingPro data reveals that NetApp has been maintaining shareholder value through aggressive share buybacks and a steady 2.1% dividend yield. InvestingPro subscribers have access to 8 additional key insights about NetApp’s financial health and growth prospects through the comprehensive Pro Research Report.

In other recent news, NetApp Inc. reported its fiscal fourth-quarter 2025 earnings, achieving record revenues and surpassing analyst expectations with earnings per share (EPS) of $1.93 against a forecast of $1.89. The company reported revenue of $1.73 billion, slightly exceeding the anticipated $1.72 billion, marking a 4% year-over-year increase. Despite these strong results, NetApp’s fiscal year 2026 revenue guidance projects a conservative growth rate of approximately 3%, which some analysts view as cautious given the macroeconomic uncertainties. JPMorgan adjusted its price target for NetApp shares to $115, down from $120, while maintaining an Overweight rating, reflecting confidence in the company’s product portfolio and market position.

NetApp’s Public Cloud segment demonstrated notable performance with a robust 22% year-over-year growth, adjusted for the divestiture of Spot. The company also reported significant growth in its AI business, expanding fivefold year-over-year. However, the EPS forecast for fiscal year 2026 has been adjusted to $7.75 from an earlier $8.75, aligning with the company’s guidance. The recent appointment of a new CFO, Wissam Jabra, may contribute to the cautious guidance amid economic uncertainties.

The company’s operating margin reached 28.6%, marking the highest Q4 in its history, and cash flow from operations totaled $675 million. Shareholder returns were substantial, with $355 million distributed through buybacks and dividends. Analysts from JPMorgan believe that NetApp’s conservative guidance may position the company to potentially exceed expectations and adjust forecasts upward throughout the fiscal year, driven by market share gains and a strong product lineup.

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