This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Network Appliance Stock Retreats to Higher Ground

Network Appliance (NTAP) shares took a beating Wednesday, losing 7% of their value after a sell-side note panned the stock on a day when most tech issues did poorly.

But the storage vendor's selloff may be the right medicine for an equity that even its fans were calling expensive.

"At $38, this stock was priced to perfection," said T. Rowe Price analyst Chirag Vasavada. "But as it pulls back, it looks more interesting," he said in an interview. Vasavada's company did not hold shares as of the latest filing period.

Indeed, since hitting a 52-week intraday high of $38.50 on April 20, the stock has depreciated by nearly 26% to $28.60 as of Wednesday's close.

This week's slide was apparently triggered by Kaufman Brothers analyst Shebly Seyrafi, who published a note replete with worries, including a rising finished-goods inventory, weak channel checks in Europe, concerns about sales to the federal government and a still historically high price-to-earnings ratio.

Seyrafi noted that the company's latest 10-K filing disclosed that NetApp's finished-goods inventory increased from $34 million, or 53% of inventory, in the third fiscal quarter, to $46 million, or 72%, in the fourth quarter -- the highest level since at least 2000. A more typical level is 50% to 55%, he said. Kaufman Brothers does not have an investment-banking relationship with NetApp.

The company's 10-K filing on Monday also revealed that NetApp received a comment letter from the Securities and Exchange Commission relating to a "routine review" of company filings. The disclosure may also have contributed to Wednesday's selloff, said Baird analyst Daniel Renouard.

However, he said the letter appears to be a standard inquiry regarding accounting practices typically received every few years by all companies and "unrelated to option-granting practices. Thus we view it as a non-issue," he said in a note to clients.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,249.17 +92.32 0.54%
S&P 500 2,009.59 +8.02 0.40%
NASDAQ 4,586.80 +24.6110 0.54%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs