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Why UBS Is Optimistic about NetApp

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UBS has a price target of $45

NetApp (NTAP) stock fell after the firm announced its fiscal 1Q18 results, driven by concerns over competition in the storage space and disappointing revenue guidance. NetApp had estimated revenues of $1.31 billion–$1.46 billion in fiscal 2Q18 with non-GAAP[1. generally accepted accounting principles] EPS (earnings per share) of $0.64–$0.72.

However, NetApp stock has recovered this month. UBS analysts Steve Milunovich and John Roy upgraded NetApp stock to a “buy” and increased the firm’s 12-month price target by $3.00 to $45.00. 

Their research note stated, “We think the post-earnings worries about services weakness will prove overdone given product sales acceleration. Our long-term concern that NetApp is a declining franchise is alleviated by more competitive flash offerings and a cloud-friendly strategy.”

According to UBS, growth in verticals such as flash and product sales coupled with increased renewal rates is expected to drive long-term revenue for the company. Milunovich expects NetApp’s hyperscale cloud storage vertical to positively impact its revenues. 

The analysts also noted that they had previously underestimated NetApp’s cost control initiatives and improved go-to-market strategy.

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Wells Fargo has a price target of $40

Wells Fargo maintained its “market perform” rating for NetApp and has a 12-month price target of $40, which is an increase of $1.00 from the earlier target of $39.00. Maxim Group, however, expects NetApp’s stock price to rise significantly to $56.00 over the next year and has a “buy” rating on the stock.

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