BTIG Has Not Had This Sense of Confidence in NetApp Inc. (NTAP) in a Long Time

BTIG's Edward Parker says NTAP served such a stellar FQ2 showcase that he apologizes for being too cautious before.


NetApp Inc. (NASDAQ:NTAP) shares are snapping up 15% to the market roof as the storage and data management company just delivered a quarterly showcase that absolutely thrived in flash storage revenue gains.

With such a strong second fiscal quarter print in hand, even sidelined BTIG analyst Edward Parker must acknowledge, “Well, we missed this one.” This marks one more quarter of “solid upside” for NetApp, one which has Parker apologizing for being overly cautious on the stock up until now.

Nonetheless, the analyst pinpoints a fine line between “recovery” and “resurgence,” and until the tech player can prove itself, the analyst is not moving from the sidelines, maintaining a Neutral rating on NTAP stock without suggesting a price target. (To watch Parker’s track record, click here)

One aspect that benefited NetApp’s successful quarter stems from product revenue riding a wave of growth territory, surging 14% year-over-year, which both beat out the analyst’s expectation calling for 10% as well as last quarter’s 10% performance. Additionally, NetApp scored an outclass with EPS of $0.81 against consensus of $0.69, which Parker attributes to “cost discipline (expected) but more importantly meaningful product gross margin improvement (unexpected).”

Parker contends, “Looking forward, bears will point out that the gravy train of negative product growth comparisons starts to end in January (+5%) and will reverse in April (+13%), which is true, but the combination of gross margin recovery, solid sequential performance, product portfolio overhaul and expansion, and resolutely bullish tone from management imbue us with a sense of confidence we haven’t had with NetApp in a long time. With that said, we’re remaining on the sidelines, as we still think there is some conflation of overdue ‘recovery’ versus the consensus now building around ‘resurgence,’ but express our regrets for our excessive caution on the stock. Live and learn.”

Glancing ahead to fiscal 2019, the analyst now projects 6% product revenue growth for the company and bumps up his EPS “meaningfully” from $3.1 to $3.69.

A great deal of cautious optimism circles this rising tech player, as according to TipRanks, based on 21 analysts polled in the last 3 months, 9 rate a Buy on NetApp stock, 10 maintain a Hold, while 2 issue a Sell on the stock. The 12-month average price target stands at $52.86.

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