On Friday, Evercore ISI increased the price target for NetApp (NASDAQ:NTAP) shares to $120 from $105, while maintaining an In Line rating.
The revision follows NetApp's report of a strong April quarter, with revenue and earnings per share slightly above consensus at $1.67 billion and $1.80 respectively.
Sales were boosted by a 6% year-over-year increase, propelled by Product Hardware performance, particularly a 17% annual rise in All-Flash Array (AFA) Annual Recurring Revenue (ARR).
The company highlighted robust demand for its C-Series and all-flash products, with more than 50 AI wins in the fourth fiscal quarter.
NetApp's Keystone program also saw significant growth, with Total Contract Value more than doubling in the fourth quarter due to competitive displacements, new customer acquisitions, and expansions with existing clients.
Looking forward, management has set a forecast for fiscal year 2025 that modestly surpasses market expectations at the midpoints, aiming for $6.55 billion to $6.90 billion in revenue versus the street's estimate of $6.53 billion to $6.74 billion. This guidance suggests approximately 4-5% sales growth and EBIT margins between 27-28%.
The company's outlook incorporates several key assumptions, including an improved macroeconomic environment compared to the start of fiscal year 2024, despite some ongoing uncertainty, a consistent uptick in cloud revenue, continued momentum for Keystone, and anticipated higher NAND costs that are expected to be counterbalanced by the gross margin contribution from cloud revenue.
NetApp's management also shared initial insights into growth opportunities in areas like file storage, block storage, cloud storage, and AI. Further details are expected to be disclosed during the upcoming analyst day.
The company's strategic position in managing unstructured data is seen as an advantage that will allow it to capitalize on the long-term opportunities presented by AI, which is increasingly driving data creation.
In summary, Evercore ISI's updated price target reflects a positive outlook on NetApp's performance and strategic initiatives, anticipating that the company will benefit from sustained AI-driven demand in the storage sector.
InvestingPro Insights
Recent data from InvestingPro underscores the financial dynamics of NetApp (NASDAQ:NTAP) that align well with Evercore ISI's price target increase. The company's market capitalization stands at a robust $24.04 billion, while maintaining a Price/Earnings (P/E) ratio of 26.33. Notably, NetApp has been showing a strong pattern of share buybacks, which is generally a sign of management's confidence in the company's future prospects—an InvestingPro Tip that investors may find reassuring.
Another InvestingPro Tip highlights that NetApp's stock is currently in overbought territory according to the Relative Strength Index (RSI), which could suggest a heightened level of investor interest following their recent earnings report. Additionally, the company's consistent dividend payments for 12 consecutive years, coupled with a dividend yield of 1.72%, reflect a commitment to returning value to shareholders.
With a Gross Profit Margin of 70.09% for the last twelve months as of Q3 2024, NetApp's profitability appears robust. Moreover, the firm's stock has been trading near its 52-week high, with a price that is 98.16% of this peak, and has experienced a significant 1-year price total return of 79.8%. These metrics could be indicative of the company's strong market performance and the positive reception of its strategic initiatives.
Investors interested in a deeper dive into NetApp's financial health and future outlook can explore additional insights with a subscription to InvestingPro. There are over 10 additional InvestingPro Tips available for NetApp at https://www.investing.com/pro/NTAP. Use the exclusive code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a comprehensive view into the investment potential of NetApp and other companies.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.