On Wednesday, Stifel updated its financial outlook on NetApp (NASDAQ:NTAP), a leading data management and storage company, by increasing the price target to $138 from the previous $130, while reiterating a Buy rating on the stock.
The price target revision follows NetApp's investor meeting held in New York, where the company outlined its medium-term growth and profitability goals for fiscal years 2025 to 2027. NetApp's targets include achieving mid-to high-single-digit top-line growth, a 30% EBIT margin, and double-digit EPS growth. The firm's guidance for fiscal year 2025 EPS is $6.90, suggesting a fiscal year 2026 EPS of at least $7.65, surpassing the consensus estimate of $7.31.
NetApp's anticipated revenue growth is attributed to the expansion of its All-Flash Array (AFA) product line, which now includes block-storage capabilities, an accelerated increase in cloud revenue, and a larger footprint in the commercial and small to medium-sized business markets. Earnings per share are expected to benefit from a higher gross margin due to a greater mix of all-flash arrays, cloud services, operational expenditure leverage, and ongoing share repurchases.
Stifel acknowledges NetApp's robust performance over the past year, which has been marked by significant margin expansion and a return to revenue growth. While Stifel's fiscal year 2026 estimates remain unchanged for the moment, the firm credits NetApp's management for its strong execution and believes the updated price target reflects the company's positive trajectory.
In other recent news, NetApp has been in the spotlight due to several significant developments. Susquehanna has raised its price target for NetApp to $155, citing potential growth in the artificial intelligence (AI) sector and block storage market share gains.
This comes as the company projects revenue growth at a mid-to-high single-digit rate on average from fiscal years 2025 to 2027. Analysts from TD (TSX:TD) Cowen have also shown optimism, raising the stock's price target to $145 and maintaining a Buy rating.
NetApp's fourth-quarter results for the fiscal year 2024 exceeded expectations, driven by strong demand for its All-Flash Arrays and improved margins. This led to an increase in revenue projections of around 4.5% year-over-year for FY25E. Furthermore, NetApp's all-flash array portfolio saw a 17% increase in revenue, reaching an annualized rate of $3.6 billion.
The company has appointed Mike Sakalas as Vice President of U.S. Enterprise Sales, aiming to enhance strategic customer engagements and elevate the customer experience in the U.S. market. Analysts from Evercore ISI, J.P. Morgan Securities, BCI, US, and Citi Research maintain a neutral rating, while firms like TD Cowen and Argus maintain a Buy rating.
InvestingPro Insights
NetApp (NASDAQ:NTAP) has been demonstrating a strong financial performance with notable highlights that align with Stifel's positive outlook. An InvestingPro Tip indicates that management has been aggressively buying back shares, which often signals confidence in the company's future and can enhance earnings per share. Additionally, the company boasts a high shareholder yield, reinforcing its attractiveness to investors seeking income as well as growth.
On the data front, NetApp's market capitalization stands at $25.82 billion, with a current P/E ratio of 26.55, reflecting investor confidence in its earnings potential. Despite a slight revenue decline of 1.48% over the last twelve months as of Q4 2024, NetApp has managed to maintain a strong gross profit margin of 70.72%, highlighting efficient operations and cost management. Moreover, the company has achieved an impressive one-year price total return of 79.9%, trading near its 52-week high, which underscores the market's positive reception to its performance and future prospects.
For readers interested in deeper analysis and additional insights, InvestingPro offers more tips on NetApp, including the company's low price volatility and its status as a prominent player in the Technology Hardware, Storage & Peripherals industry. To explore these further, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where you'll find 17 additional InvestingPro Tips to guide your investment decisions.
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