Wiliam Blair downgraded Dropbox (NASDAQ:DBX) and NetApp (NASDAQ:NTAP) to Market Perform from Outperform in separate notes on Monday.
Analysts told investors that the firm downgraded NTAP as the cloud thesis is not playing out, while the company's core storage business is facing headwinds, and they see limited operating margin upside from here.
While also taking into consideration the current macro headwinds, the analysts said that the firm is "increasingly questioning the company's ability to execute in the space, successfully integrate key acquisitions, and expand its cloud storage portfolio beyond a relatively narrow set of use-cases, all of which put in doubt the company's ability to achieve sustained high-single-digit revenue growth."
"We believe NetApp's over-rotation to cloud services in recent years has left the company flat-footed in the on-premises storage systems market," they added.
On DBX, they said there are more questions than answers. "We believe Dropbox has lackluster organic revenue growth prospects in 2024," they wrote.
"We question Dropbox's overall growth strategy and ability to drive better monetization of its massive user base—new generative AI capabilities (DASH and Dropbox AI) are not expected to drive material revenue contribution until at least 2025," they added.
William Bair also sees limited room for margin expansion going forward for DBX.