The analyst firm has upgraded NetApp to its "conviction buy" list, citing improving revenue and operating margins, and raised its price target from $23 in a note released late Sunday. NetApp's stock closed at $24.75 Friday.
"We expect NetApp shares to move to our new 12-month target price of $32 (29% upside) as Street estimates for the company move higher," wrote Goldman analyst David Bailey. "The pent-up demand for hardware, and particularly storage, should lead to a spending snapback as IT budgets begin to loosen in the second half of 2009."
More specifically, Bailey predicts that NetApp will return to more than 10% revenue growth in its fiscal 2011, which ends in April. The company will also reach its 16% operating margin target early next year and then maintain that level of profitability for the fiscal year, he added.NetApp, which recently lost out to rival EMC (EMC) in the battle to acquire Data Domain (DDUP) is seen as something of a storage trailblazer. The Sunnyvale, Calif.-based firm recently posted strong first-quarter results, is a leader in de-duplication technology, which ensures that the same pieces of information are not stored twice. With users wrestling with every-growing volumes of data, 'de-dupe', as it is known, is fast emerging as one of tech's hottest technologies. NetApp, which is locked in a market share battle with rivals EMC and Hewlett-Packard (HPQ), is now seeing greater demand for its products as businesses slowly emerge from the recession. The Americas, in particular are creeping back, with NetApp's first-quarter revenue increasing 1% both sequentially and year-over-year.
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