On Friday, Citi maintained a Neutral rating on NetApp (NASDAQ:NTAP) stock while increasing the share price target from $130.00 to $135.00. The adjustment follows NetApp's recent performance, where the company's shares saw a 5% increase after reporting earnings and revenue that surpassed expectations. NetApp posted revenues of $1.66 billion and earnings per share (EPS) of $1.87, compared to the Street's forecast of $1.64 billion in revenue and an EPS of $1.78.
NetApp's management highlighted the strength across their product portfolio, which includes flash-based storage, FAS hybrid flash arrays, and 100 AI data lake modernization deals, as well as their public cloud offerings. This diversified strength has contributed to NetApp's market share gains. Additionally, gross margins exceeded expectations, bolstered by the robust performance of their flash storage and improvements in their first-party public cloud services.
Looking forward, NetApp anticipates continued robustness in their offerings and strong execution, which they believe will counterbalance the ongoing, yet stable, challenges in the macroeconomic environment. This is expected to lead to mid-single digit revenue growth. Despite these positive indicators, Citi notes that NetApp faces tougher comparisons in the future and significant upside may be limited until there is a more widespread recovery in enterprise storage spending or a substantial increase in AI-driven storage demand, which is likely to materialize in the second half of calendar year 2025.
In light of these results, Citi has revised their estimates upward. The new price target of $135.00 is based on an unchanged 15x price-to-earnings (PE) multiple over the next 24 months. The firm's commentary indicates that while NetApp's current performance is strong, broader market conditions will play a critical role in the company's future growth potential.
In other recent news, NetApp reported a strong Q2 performance for the fiscal year 2025, with a 6% year-over-year increase in revenue, hitting $1.66 billion. The company also raised its full-year revenue outlook to between $6.54 and $6.74 billion. Earnings per share surpassed expectations, with NetApp predicting a 13% increase in full-year EPS to fall between $7.20 and $7.40. Other noteworthy developments include a record operating margin for the quarter, a 19% increase in annualized revenue from all-flash storage arrays, and a 9% growth in public cloud revenue.
Partnerships with firms like Google (NASDAQ:GOOGL) Cloud have been expanded, and the Keystone storage-as-a-service offering saw approximately 55% growth year-over-year. These are among the recent developments that highlight the company's positive momentum.
InvestingPro Insights
NetApp's recent performance aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at $25.94 billion, reflecting its significant position in the Technology Hardware, Storage & Peripherals industry. NetApp's P/E ratio of 24.27 suggests investors are willing to pay a premium for its earnings, possibly due to its strong market position and growth prospects.
InvestingPro Tips highlight that NetApp has been aggressively buying back shares, which often signals management's confidence in the company's future. This aligns with the positive earnings report and the company's expectations for mid-single digit revenue growth. Additionally, NetApp has maintained dividend payments for 12 consecutive years, demonstrating a commitment to shareholder returns that complements its growth strategy.
The company's revenue growth of 2.82% over the last twelve months and a more impressive 7.61% growth in the most recent quarter support management's optimistic outlook. NetApp's gross profit margin of 71.11% underscores its ability to maintain profitability, which is crucial in the competitive tech hardware sector.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for NetApp, providing a deeper understanding of the company's financial health and market position.
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