NetApp Adds a New Risk Factor

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NetApp (NTAP) is a Fortune 500 company based in California. It provides cloud-based, data-focused software solutions. In a business expansion move, NetApp recently acquired CloudCheckr, a cloud optimization platform that helps customers lower their costs.

With this in mind, we used TipRanks to take a look at the latest financial performance and newly added risk factor for NetApp. (See Insiders’ Hot Stocks on TipRanks)

Q2 Financial Results

NetApp reported revenue of $1.57 billion for its Fiscal 2022 second-quarter ended October 29, against $1.42 billion in the same quarter last year. It posted adjusted EPS of $1.28, compared to $1.05 in the same quarter last year.

NetApp returned $237 million to investors in Q2 through dividends and share repurchases. It ended the quarter with $4.55 billion in cash.

For Q3, the company anticipates revenue in the range of $1.53 billion to $1.68 billion. It expects adjusted EPS in the band of $1.21 to $1.31. (See NetApp stock charts on TipRanks).

Risk Factors

According to the new TipRanks Risk Factors tool, NetApp’s main risk category is Finance and Corporate, representing 29% of the total 38 risks identified for the stock. The company recently updated its profile with one more Financial and Corporate risk factor.

It tells investors that it recently decided to adopt a new segment reporting structure. As a result, it now has two reportable segments: Public Cloud and Hybrid Cloud. In Q2, Public Cloud segment revenue was $87 million, and Hybrid Cloud segment revenue was $1.48 billion. NetApp explains that the two segments are intended to reflect how management allocates resources and analyzes performance. However, it cautions that the change has only been in effect for a limited period and may not deliver the desired effect. Therefore, it may need to further adjust the segment reporting structure in the future. Furthermore, additional costs or liabilities incurred in the future may impact the implementation of the new segment reporting structure.

Finance and Corporate risk factor’s sector average is 40%, compared to NetApp’s 29%. NetApp’s stock has gained about 33% since the beginning of 2021.

Analysts’ Take

Following NetApp’s Q2 earnings report, Loop Capital Markets analyst Ananda Baruah reiterated a Buy rating on NetApp stock and raised the price target to $100 from $95. Baruah’s new price target suggests 13.38% upside potential.

Consensus among analysts is a Moderate Buy based on 7 Buys, 6 Holds, and 1 Sell. The average NetApp price target of $99.46 implies 12.77% upside potential to current levels.

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