Shares of NetApp Inc. NTAP continued to get hammered in early trading on Thursday, after closing lower on Wednesday.
The consensus estimates for the second half of 2024 reflect accelerating growth, which appears too aggressive and likely to be reduced meaningfully, according to BofA Securities.
The NetApp Analyst: Wamsi Mohan downgraded the rating for NetApp from Neutral Underperform, while reducing the price target from $70 to $58.
The NetApp Thesis: Product revenues are likely to decline by 10%, “given our view that the new AFF-C product will take time to ramp and the company lost significant share in AFA last quarter,” Mohan said in the downgrade note.
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The analyst mentioned 7 reasons for the downgrade:
- Pressure on product revenue growth in fiscal 2024, given the weaker demand environment
- Further growth headwinds through fiscal 2024 due to a slowdown in public cloud
- NetApp could experience pressure on gross margins due to “negative leverage from lower revs”
- The 8% workforce reduction “will not be an incremental tailwind to current ests”
- Operating expenses in the first half of 2024 may create additional pressure
- It is “too early to count on material contribution from AFF-C”
- NetApp’s loss of share in All Flash Arrays is unlikely to reverse in the near term
NTAP Price Action: Shares of NetApp had declined by 4.37% to $63.26 at the time of publishing Thursday.