By Sam Boughedda
Stifel analysts raised NetApp (NASDAQ:NTAP)) to Buy from Hold with a $75 per share price target in a note Monday, following investor meetings with the company's CFO Mike Berry and IR VP Kris Newton.
The analysts explained that NetApp's management acknowledged that predicting when the current demand cycle will bottom continues to be difficult.
"They also pointed to several company-specific initiatives/catalysts that should help boost margins and EPS in coming quarters, regardless of how macro plays out," they added. "Those include: 1) a recent 8% headcount reduction; 2) a planned sales force re-org aimed at aligning reps more closely with specific customers and vendors; 3) an expected margin tailwind from lower component costs due to improved supply; and 4) the recent introduction of QLC-based, lower-cost all-flash arrays (C-Series), which could help boost market share."
Within the macro headwinds, NetApp's management noted that much of the weakness it has seen is from its all-flash business in recent quarters and stems from lower spending at large enterprise customers, explained the analysts.
Nevertheless, Stifel came away from the meetings more confident in its "FY24 estimate -- $5.49 -- which reflects a soft 1H but a return to sales and EPS growth in 2H24."