Shares of cloud storage company NetApp (NTAP) have fallen close to 17.0% in the last 12 months. Since the start of May, NetApp stock has lost over 19.0%, and it’s currently trading 33.0% below its 52-week high of $88.08. Despite the recent pullback, NetApp shares have gained ~33.0% annually in the last three years.
Last month, NetApp announced its fiscal 2019 fourth-quarter results (for the year that ended in April), which disappointed investors. NetApp’s revenue rose 4.0% YoY (year-over-year) to $1.59 billion in fiscal 2019, and it saw adjusted EPS of $1.22. Wall Street expected the company to post sales of $1.64 billion and EPS of $1.26.
In the upcoming quarter, NetApp expects sales of between $1.32 billion and $1.47 billion and EPS of between $0.78 and $0.86—again below Wall Street’s revenue and earnings estimates of $1.5 billion and $1.05, respectively.
NetApp has attributed its tepid quarterly performance and guidance to execution issues in sales as well as currency fluctuations. Contract renewals in the last quarter were lower than company expectations. NetApp also stated that data center deals are now taking longer than expected.
NTAP is trading at a forward PE multiple of 11.8x. While analysts expect its earnings to rise 10.1% in fiscal 2020, they expect its earnings to rise at a compound annual growth rate of 17.9% over the next five years.
Comparatively, its earnings have risen 11.7% in the last five years. Despite revenue growth in the low single digits, NetApp has been able to expand its bottom line robustly. It also has a dividend yield of 3.2%, and it seems undervalued considering its PE multiple.
Of the 29 analysts tracking NetApp, 14 have given it “buy” ratings, 13 have given it “holds,” and two have given it “sells.” Analysts have a 12-month average target price of $79.3 on its stock, which indicates a potential upside of 35.0% from its current price.