A recent Bank of America survey of NetApp (NASDAQ:NTAP) Value-Added Resellers (VARs) survey revealed a stable demand environment in the IT hardware sector.
The bank revealed that in the first quarter of 2024, 50% of NTAP VARs reported sales tracking in line with their plans, though the overall sentiment was slightly negative with a weighted score of -0.3%, down from +0.8% in the previous quarter.
Expectations for storage demand have slightly declined, "with 30% noting that the storage order pipeline has both long-term & short-term deals (down from 35% in C4Q) and 70% answered that they were unclear if storage demand will sustain through CY24 (+5% q/q)," the note states.
Discounting practices have increased, with 60% of respondents observing accelerated discounting in C1Q24, up from 35% in the previous quarter. "Sometimes discounting in the channel increases as an opportunity to take share especially when the Direct Sales track stronger," Bank of America notes.
Order rates for C1Q24 were mixed, remaining flat on average compared to the previous quarter. "April orders were lower vs March with VARs on average observing -0.3% decline," the survey reports. Lead times were relatively stable.
In terms of flash storage deployments, NTAP saw a slight increase. "20.5% of the survey participants' customers currently deploy All-Flash FAS or NetApp's EF/E-series for their flash needs, which is higher than 19% in the previous survey," Bank of America highlights. NetApp's flash wallet-share also increased to 25%, with Pure and Dell leading the market.
Overall, the survey underscores a largely stable demand environment for IT hardware. The bank maintained an Underperform rating on NTAP as they see potential macro and execution risk to estimates but acknowledge that margins are holding up better than expected.