NetApp Inc. (NASDAQ: NTAP) caused some waves this past week. On top of lower-than-expected revenues, NetApp announced that it plans to slash about 12% of its workforce in an effort to lower costs. It seems that the endless amounts of storage being bought might not be as endless as many investors historically have been led to believe.
NetApp’s revenues were down over 10% to $1.39 billion and were shy of the $1.45 billion consensus estimate. Its $153 million in net income generated $0.52 in earnings per share, down from $0.56 per share, or $177 million, a year ago. If you back out the extraordinary items, NetApp’s operating earnings of $0.70 per share were actually two cents above estimates.
What hurt here, and what is driving analysts away, is that this was the third weak revenue report. Investors need to remember that technology analysts and investors like growth, particularly if it pertains to technology giants.
NetApp’s nearly 13,000 workers will have to wait to see who all gets fired, and if those terminations are inside of its recent acquisition of SolidFire.
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NetApp has a problem on its hands for growth: there just wasn’t any from 2013 to 2015 (fiscal year ends in April). Perhaps the good news is that, even after buybacks and dividend payments, NetApp ended its fiscal year 2016 with a total of about $5.0 billion in cash.
24/7 Wall St. tracked many key analyst calls on NetApp, and some of the boutique firms were not included due to the number of calls seen.
- Barclays has an Underweight rating and lowered its price target to $23 from $25.
- BMO Capital Markets has a Market Perform rating but lowered its price target to $24 from $32.
- Citigroup has a Neutral rating but raised its price target to $26 from $24.
- Credit Suisse maintained a Neutral rating but lowered its price target to $27 from $31.
- Deutsche Bank has a Hold rating but lowered its price target to $22 from $25.
- Jefferies has a Hold rating and raised its price target to $26 from $23.
- JMP Securities has an Underperform rating but lowered its price target to $21 from $24.
- JPMorgan has a Neutral rating but lowered its target to $30 from $33.
- Maxim has a Buy rating but lowered its price target to $40 from $43.
- Monness Crespi Hardt raised its rating to Neutral from Sell.
- Morningstar has a Hold rating.
- Piper Jaffray has a Neutral rating but lowered its price target to $25 from $27.
- Robert W. Baird downgraded it to Neutral from Outperform.
- S&P Capital IQ maintained its Sell rating and has a $22 price target.
- Summit Research maintained a Sell rating but lowered its price target to $20 from $28.
- Susquehanna has a Neutral rating but lowered its price target to $25 from $31.
NetApp shares close up about 3% at $24.64 on Friday. It has a 52-week trading range of $20.66 to $39.14 and a $7.2 billion market cap.
These numbers might not seem that good on the surface, but NetApp continues buying back stock and it has close to a 3% dividend yield. The stock closed at $21.89 the previous Friday, so that closing price on Friday would have translated to roughly a 12% gain week over week.
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