On Wednesday, Susquehanna maintained a Positive rating on NetApp (NASDAQ:NTAP) and increased the shares target to $130 from $115.
The adjustment comes ahead of the company's fourth-quarter fiscal year 2024 earnings report, which is scheduled for release on May 30 after the market closes.
The firm cited potential revenue growth acceleration in All-Flash Arrays (AFA) into fiscal years 2025-26 as a key driver for the updated price target. This outlook is based on recent checks and leads to an upward revision of the firm's estimates, which are already above consensus.
Despite concerns from some investors regarding the potential for gross margin (GM) contraction due to rising NAND costs, Susquehanna anticipates that NetApp will achieve operating margin (OM) expansion.
The firm argues that a favorable product mix and operational expenditure leverage will contribute to this growth, suggesting that the full extent of the potential OM expansion may not yet be reflected in their estimates.
The firm also expects that NetApp will either meet or surpass expectations for the April quarter (4QFY24). The revenue and earnings per share (EPS) estimates provided by Susquehanna are nearly in line with the consensus estimates of $1.66 billion and $1.78, respectively, which align with the midpoint of NetApp's guidance range.
The optimism also extends to NetApp's C-Series products, which incorporate QLC NAND technology and are deemed suitable for new workloads.
Susquehanna believes that the potential for a product refresh and upgrades in the midrange storage market will further support NetApp's business prospects.
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