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On Thursday, Citi updated its stance on NetApp (NASDAQ:NTAP) shares, a leading data storage and management company, by increasing the price target from $120 to $130 while retaining a Neutral rating on the stock. The firm's decision follows NetApp's optimistic long-term forecast on June analyst day.
The revision reflects Citi's expectation for NetApp's revenue, margins, and earnings per share (EPS) for the June quarter to align with the company's guidance and current market projections.
The focus for investors, according to the firm, will be on the trajectory of storage demand, the momentum in flash-based and block storage offerings, the performance of the overall public cloud segment, particularly first-party cloud storage services, and margin expectations in light of strategic flash buy-ahead for the remainder of the 2024 calendar year and into 2025.
NetApp's positioning to capitalize on improving storage demand trends was highlighted, citing the transition to flash storage with its AFF Series products, block-optimized and native cloud offerings, opportunities with hyperscalers, and the acceleration of artificial intelligence and unstructured data deployments. These factors contribute to the company's robust market position.
Citi also slightly raised its EPS estimate for the fiscal year 2026 based on a more favorable outlook for operating expense control. The firm's revised price target of $130, up from $120, comes with a maintained Neutral view.
The firm indicates that it is looking forward to NetApp's execution on various opportunities that could drive sustainable market share gains and improvements in Public Cloud performance, which may lead to a more constructive stance on the company's shares in the future.
In other recent news, NetApp has made several significant strides. The company's fourth-quarter results for the fiscal year 2024 outperformed expectations, largely driven by robust demand for its All-Flash Arrays and enhanced margins.
This led to projected revenue growth of approximately 4.5% year over year for FY25E. Additionally, NetApp's all-flash array portfolio saw a 17% increase in revenue, reaching an annualized rate of $3.6 billion.
NetApp has appointed Mike Sakalas as Vice President of U.S. Enterprise Sales, aiming to enhance strategic customer engagements and elevate the customer experience in the U.S. market.
Analyst firms have also weighed in on NetApp's performance. Stifel, Susquehanna, and TD Cowen have raised their price targets for NetApp and maintained a Buy rating. At the same time, Evercore ISI, J.P. Morgan Securities, BCI, US, and Citi Research have upheld a neutral rating.
NetApp's management has outlined its medium-term growth and profitability goals for fiscal years 2025 to 2027. The targets include achieving mid-to-high-single-digit top-line growth, a 30% EBIT margin, and double-digit EPS growth.
NetApp's revenue growth is expected to stem from the expansion of its All-Flash Array product line, an accelerated increase in cloud revenue, and a larger footprint in the commercial and small to medium-sized business markets.
The company anticipates total revenue for the fiscal year 2025 to be between $6.45 and $6.65 billion, with an EPS range of $6.80 to $7.00. These recent developments underscore NetApp's ongoing efforts to drive growth and deliver value to its shareholders.
InvestingPro Insights
As NetApp (NASDAQ:NTAP) continues to navigate the evolving data storage landscape, real-time metrics from InvestingPro provide a snapshot of the company's financial health and market performance. With a market capitalization of $26.16 billion, NetApp maintains a solid industry presence. Its P/E ratio stands at 26.87, reflecting investor expectations for future earnings growth. Notably, the company has demonstrated a strong return on assets of 10.01% over the last twelve months as of Q4 2024, signaling efficient use of its assets to generate profits.
InvestingPro Tips highlight that management's aggressive share buybacks and a pattern of 12 consecutive years of dividend payments, currently yielding 1.64%, underscore NetApp's commitment to shareholder returns. Additionally, with 9 analysts having revised their earnings estimates upwards for the upcoming period and the stock trading near its 52-week high, there's an evident confidence in NetApp's performance trajectory. For investors seeking more detailed analysis, there are 15 additional InvestingPro Tips available, offering deeper insights into NetApp's market position and financials.
Considering Citi's updated price target and NetApp's strategic initiatives, these InvestingPro metrics and tips may serve as valuable information for investors monitoring the company's progress and evaluating its potential for sustainable growth.
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