By Sam Boughedda
NetApp (NASDAQ:NTAP) was cut to Underperform from Neutral by BofA analysts, who also cut the firm's price target on the stock to $58 from $70 in a note Thursday.
The analysts told investors that weak demand has created a risk to estimates, while consensus estimates are too high.
"Product rev growth will be challenged in F24 given weaker demand environment," said analysts, adding that a slowdown in public cloud creates a growth headwind through F24.
"Although product GMs will see some benefits, we also expect negative leverage from lower revs," they wrote.
Analysts also pointed to the company's 8% workforce reduction already being in Q4 guidance, meaning it "will not be an incremental tailwind to current ests."
"We view the accelerating growth modeled by consensus, especially in F2H24, as too aggressive and expect meaningful cuts to overall growth. We now model revenues for F24 at $6.14bn vs. Street at $6.26bn. We model F24 EPS of $5.30 vs. Steet at $5.65 (Visible Alpha). Enterprise Storage did not experience any material increase in backlogs, and hence we expect the revenues to trend down with weakening orders," they concluded.