Since reaching a high of $46.80 on April 3, the stock has plummeted as much as 40%. Remarkably, this comes on the heels of the company reporting better-than-expected third-quarter earnings and offering an outlook in line with Wall Street expectations. So what's the problem?
It seems aside from the stiff competition from other storage rivals including EMC (EMC), IBM (IBM) and, to some extent, Hewlett-Packard (HPQ), investors have also become fearful of NetApp's growth prospects, which are heavily predicated on the overall health of enterprise and government storage spending.
With such a prolonged weakness in that market, and with NetApp's recent share decline, are investors justified for having turned their backs on the stock? While the stock might now seem discounted by the sector's standards, can NetApp prove its value to investors?For its fiscal 2013 first quarter, NetApp reported net income of $64 million, or 17 cents per share, on revenue of $1.445 billion, in line with its previously stated guidance. On a non-GAAP basis, EPS arrived at $156 million, or 42 cents per share. The company beat Street expectations on earnings while meeting analysts' revenue forecasts. While the company's report was far from horrible, it did leave some investors wondering if can it overcome weakness in storage spending. Revenue actually declined by 1% from the previous year and 15% from the fourth quarter. This fact did not escape investors waiting for the sort of returns expected by a dominant cloud player. Margins were not any better. Though it improved from the fourth quarter, it gave up close to three points from the same period of a year ago. Guidance for the second quarter was somewhat mixed. NetApp expects EPS to arrive at approximately 45 cents to 50 cents per share on revenue of $1.5 billion to $1.6 billion. Revenue projections would represent growth of 7% from the first quarter and roughly 3% annually. With low-single-digit growth projections, the company is guiding cautiously -- understandably so. But investors have grown impatient.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV