- MorganStanley Analyst Meta Marshall downgraded NetApp Inc NTAP from balanced to underweight and lowered the target price to $58 from $66.
- The re-rating reflected the analyst’s view that NTAP’s multiple has room for downside in the current phase of cloud business digestion, which has been the driver of the premium in the name.
- NetApp reported disappointing prospects for their premise and cloud Companies on their Q2 earnings last month.
- NTAP began to see negative estimate revisions after a post-COVID rebound in IT spending.
- The company saw the sweating of premise assets and the digestion of the cloud business.
- A company comment from the recent NASDAQ conference indicated that this digestion period would likely span several quarters.
- The comment made analysts even more uncertain whether the estimate revisions were complete, especially given the more difficult visibility NTAP has for this part of the business.
- The combination of estimates put it at greater risk of near-term revisions and underperformance of the asset, putting the name at risk of underperformance over the next 12 months.
- Valuation has decreased, but a re-evaluation will likely require more confidence in the estimates.
- The PCS business is a key value driver, but the path to the potential cloud digest phase remains unknown.
- Price promotion: NTAP shares traded 0.51% lower at $64.96 on the latest check Tuesday.
- Photo via Wikimedia Commons
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
[ad_2]
Source story
