On Tuesday, BofA Securities updated its stance on NetApp (NASDAQ:NTAP) shares, a leading company in the data storage industry. The firm increased its price target on the company's shares to $115 from the previous target of $110, while keeping an Underperform rating on the stock.
The adjustment comes ahead of NetApp's expected earnings report for the second quarter of fiscal year 2025, which is scheduled to be released after the market closes on Thursday, November 21st. BofA Securities' analyst has modeled NetApp's revenue and earnings per share (EPS) for the quarter at $1.64 billion and $1.78 respectively. These figures align with the consensus estimates on Wall Street and fall within the midpoint of the company's own guidance.
The anticipated gross margin for the quarter is 71.8%, which is at the upper end of the company's projected range of 71-72% and consistent with the expectations of other analysts. Product gross margins for the October and January quarters are forecasted to be 59.9% and 59.8%, mirroring the levels seen in the first quarter of the fiscal year.
In the previous earnings call, NetApp's management highlighted their strategic moves to secure solid-state drive (SSD) supply and combat potential price hikes in the future. These efforts are expected to bolster product gross margins.
Despite the increase in the price target, BofA Securities reiterated its Underperform rating on NetApp shares. The firm cited potential macroeconomic risks and the possibility of rising memory prices as factors that could pose a threat to the company's financial estimates. However, it was acknowledged that NetApp's margins have remained more resilient than initially anticipated.
In other recent news, NetApp has seen several significant developments. The company reported an 8% year-over-year increase in revenue for the first quarter of fiscal year 2025, accompanied by record-breaking operating margin and earnings per share. As a result, NetApp has revised its revenue and profit outlook for the fiscal year upwards.
The company also announced strategic partnerships with Google (NASDAQ:GOOGL) Cloud, NVIDIA (NASDAQ:NVDA), and Amazon (NASDAQ:AMZN) Web Services to enhance AI security, AI-driven data management, and cloud operations. These collaborations aim to provide improved control over data and foster secure application development.
In the realm of analyst ratings, NetApp's stock has been upgraded from Hold to Buy by Loop Capital, while TD Cowen reiterated a Buy rating. Furthermore, NetApp's shareholders approved a significant amendment to its 2021 Equity Incentive Plan, aligning it with current compensation governance standards.
In leadership developments, Gus Shahin has been appointed as NetApp's Executive Vice President of Business Technology and Operations, while CFO Mike Berry announced his retirement effective at the end of the fiscal year. These are among the recent developments at NetApp.
InvestingPro Insights
NetApp's financial metrics and market performance offer additional context to BofA Securities' analysis. According to InvestingPro data, NetApp boasts a market capitalization of $24.44 billion and a P/E ratio of 22.72, indicating investor confidence in the company's earnings potential. The company's revenue for the last twelve months stands at $6.377 billion, with a modest growth of 2.82%.
InvestingPro Tips highlight NetApp's strong financial position and shareholder-friendly policies. The company has maintained dividend payments for 12 consecutive years, demonstrating a commitment to returning value to shareholders. This is further supported by management's aggressive share buyback program, which could potentially boost earnings per share.
NetApp's profitability is also noteworthy, with InvestingPro data showing a gross profit margin of 71.11% for the last twelve months, aligning closely with BofA Securities' forecast for the upcoming quarter. The company's operating income margin of 21.34% suggests efficient operations, which may contribute to its ability to navigate potential macroeconomic challenges.
While BofA Securities maintains an Underperform rating, it's worth noting that NetApp has delivered a high return over the last year, with a one-year price total return of 56.86%. This performance, coupled with the company's moderate debt levels, may provide some resilience against the economic risks mentioned in the analyst report.
For investors seeking a deeper understanding of NetApp's potential, InvestingPro offers 7 additional tips, providing a more comprehensive view of the company's prospects and challenges in the evolving data storage market.
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