The move came, “as we begin to factor in a moderating information technology spending environment in 2022,” said Goldman analyst Rod Hall.
“We note that our proprietary EAI (Expected Activity index) U.S. IT spending indicator has declined materially for a third straight month in September and is off meaningfully from record high levels seen between April and June,” Hall wrote.
NetApp on Monday closed at $90.34, down 4.3%. It has jumped 18% in the past three months.
“Given the EAI has historically been a good leading indicator of NetApp’s U.S. revenues, we are adjusting our Core Product revenue growth forecast to negative 0.4% from plus 2.1% in fiscal year 2023 (to April),” Hall wrote in a commentary.
“On the positive side of the ledger, NetApp’s cloud execution has been strong and, as a result, our Public Cloud estimates are at the top of the company’s indicated annual recurring revenue range of $450-500 million exiting this year.
“However, we note that the revenue contribution from this business is still only 9% of the company’s estimated revenue in fiscal year 2023. As a result, Public Cloud is unlikely to offset pressure on Product revenue.”
Morningstar analyst Mark Cash assigns NetApp a $60 fair value and no moat
“With our longer-term view of concerns about NetApp carving out a sustainable competitive advantage against larger market participants and cloud-native options, we view shares as overvalued,” he wrote in August.