The firm upgraded the data storage company to "overweight" from "neutral," raising the target price to $52 from $38. Analysts Andrew J. Nowinski and Ryan R. Bergan said they believe demand for the company's FAS products is strong and will continue to gain momentum in the near-term. "Moreover, we believe NetApp's OEM revenue, which has weighed on growth over the last 4 quarters, is now set to return to growth," the analysts wrote.
Nowinski and Bergan also wrote that NetApp has a chance to "significantly outperform" competitor EMC (EMC) in the data storage market in 2014 and after.
The analysts also raised their earning predictions. They now expect earnings from NetApp of $2.72 a share in 2014, up from $2.67 a share. For 2015, the analysts expect earnings of $3.13 a share, up from the previous estimate of $2.94.
TheStreet Ratings team rates NETAPP INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about its recommendation:
"We rate NETAPP INC (NTAP) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Computers & Peripherals industry. The net income increased by 52.2% when compared to the same quarter one year prior, rising from $109.60 million to $166.80 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 4.6%. Since the same quarter one year prior, revenues slightly increased by 0.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although NTAP's debt-to-equity ratio of 0.24 is very low, it is currently higher than that of the industry average. To add to this, NTAP has a quick ratio of 2.44, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has slightly increased to $362.50 million or 7.75% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -4.27%.
- The gross profit margin for NETAPP INC is rather high; currently it is at 67.60%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, NTAP's net profit margin of 10.76% significantly trails the industry average.
- You can view the full analysis from the report here: NTAP Ratings Report