Summit Research Downgrades NetApp (NTAP) to Hold

Summit Research downgraded NetApp (NASDAQ: NTAP) from Buy to Hold with a price target of $32.00 following another miss.

Analyst Srini Nandury commented, "We are downgrading NTAP to HOLD following yet another disappointing quarter and worse than expected guidance. NTAP not only missed the estimates as we had predicted but also lowered the outlook for the full year. We also predicted that the GM may have peaked will likely be impacted in F4Q (we heard of heavy discounting). See our note published on 5/13/15 titled "Lowering estimates and PT; Branded biz declines masked by E-series". After speaking to the company following the earnings call, we are skeptical the company will return to growth in the back half of the year as the management calls. During the last 8 quarters, the company missed consensus expectations seven times, yet we gave the company a pass each time because of the solid technology (clustering for instance) and sustained R&D investments. But now we are unsure if the company has the right products for the changing environment, given that not everyone needs clustering. While clustering is a solid technology and is used to scale storage, the storage boxes (i.e. FAS2000, FAS3000 and FAS6000) that are used with clustering themselves may be inefficient. We now believe that the company has both product issues as well as execution issues to contend with and fixing both at the same time is daunting even for the most savvy operators. Therefore we move to HOLD and establish a new $32 PT. Our $32 PT is based on 8.2x on C2016 earnings of $2.53, plus net cash of ~$11.00."

For an analyst ratings summary and ratings history on NetApp click here. For more ratings news on NetApp click here.

Shares of NetApp closed at $35.33 yesterday.

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