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5 Key Positives From NetApp's Q2 Report

NetApp's Q2 Report: Citi's 5 Key Positives

NetApp Inc. NTAP 6.25% delivered solid second-quarter results as cost cutting boosted margins. Further, the company’s third-quarter earnings forecast came in above Street view.

Guidance

For the January quarter, NetApp guided sales/EPS of $1.325 billion–$1.475 billion/$0.72–$0.77. The sales forecast bracketed consensus estimate of $1.36 billion and EPS coming above consensus expectations of $0.65.

Citi's Take

Citi’s Jim Suva, who has a Neutral rating on the stock, laid out five positives from NetApp’s print:

    1. “EPS beat by $0.06 due to cost saving effort which drove operating margin outperformance of 160bps above consensus.”
    2. “EPS guidance for 3Q, beat consensus by $0.10 and sales guidance bracket consensus estimates.”
    3. “All flash array business saw triple digit growth y/y with an annualized run rate over $1 billion, with All flash FAS remaining a strong selling point with customers looking to improve existing infrastructure and processes.”
    4. “NetApp remains on track to achieve both long term growth and the target operating range (15 percent to 17 percent in FY17 and 18 percent in FY18).”
    5. “Continue to take share from competitors.”

Suva also raised his target price to $39 from $33 on improving margins and better opex management. The revised target implies a potential return of 12.3 percent over November 16 close.

“We continue to be positive on management’s ability to decrease OpEx and improve margins,” Suva wrote in a note.

Another Voice From The Street

Separately, analysts at Drexel Hamilton upgraded NetApp to Buy from Hold on strong quarterly results.

At last check, shares of NetApp had climbed 8.79 percent on the day to $37.78.

Image Credit: By LPS.1 - Own work, CC0, WikiMedia Commons.

DateFirmActionFromTo
Nov 2016Maxim GroupDowngradesBuyHold
Nov 2016Drexel HamiltonUpgradesHoldBuy
Nov 2016OTR GlobalDowngradesMixedNegative

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