Is NetApp (NTAP) Stock's Downward Movement a Buying Opportunity?
NEW YORK (TheStreet) -- NetApp (NTAP) - Get Report staged a nice upside reversal in early October after declining for much of the year. Prices popped but have started to correct lower. We think the lower movement is a buying opportunity for further gains into the new year.
In this chart of NTAP above, we can see the orderly decline in NTAP until the sharp rally in early October. Prices rallied over the 50-day moving average with the On-Balance-Volume (OBV) line rising. Traders should look to buy weakness closer to $32 and then use a sell-stop at $30.
This longer-term view of NTAP, above, suggests we could be looking at a large double bottom pattern with the first lows in 2012. It is too early to anticipate that this will indeed become that classic reversal pattern, but for now a rally into the overhead resistance in the $40-$45 area would be welcome.
TheStreet Ratings team rates NETAPP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate NETAPP INC (NTAP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, NTAP has a quick ratio of 2.16, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for NETAPP INC is rather high; currently it is at 67.12%. Regardless of NTAP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NTAP's net profit margin of -2.24% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Computers & Peripherals industry. The net income has significantly decreased by 133.9% when compared to the same quarter one year ago, falling from $88.40 million to -$30.00 million.
- The share price of NETAPP INC has not done very well: it is down 20.84% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.
- You can view the full analysis from the report here: NTAP
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.