Company Performance - NetApp's stock closed at $98.33, down 1.01%, underperforming the S&P 500's loss of 0.13% on the same day [1] - Over the past month, NetApp's stock has decreased by 7.25%, contrasting with the Computer and Technology sector's gain of 1.88% and the S&P 500's gain of 0.78% [1] Upcoming Earnings - NetApp is expected to report an EPS of $2.07, reflecting an increase of 8.38% from the same quarter last year [2] - Revenue is anticipated to reach $1.7 billion, indicating a 3.32% increase compared to the previous year [2] Fiscal Year Estimates - For the entire fiscal year, earnings are projected at $7.88 per share, representing an 8.69% increase year-over-year [3] - Revenue estimates for the fiscal year stand at $6.76 billion, showing a 2.89% rise from the prior year [3] Analyst Estimates - Recent changes to analyst estimates for NetApp are crucial as they reflect the evolving business landscape [4] - Upward revisions in estimates indicate analysts' positive outlook on the company's operations and profit generation capabilities [4] Zacks Rank and Valuation - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently rates NetApp at 3 (Hold) [6] - NetApp's Forward P/E ratio is 12.61, which is a discount compared to the industry average Forward P/E of 23.29 [6] PEG Ratio - NetApp has a PEG ratio of 1.77, aligning with the industry average PEG ratio of 1.77 [7] Industry Overview - The Computer-Storage Devices industry is part of the Computer and Technology sector and holds a Zacks Industry Rank of 24, placing it in the top 10% of over 250 industries [8] - Research indicates that industries in the top 50% outperform those in the bottom half by a factor of 2 to 1 [8]

Valued at a market cap of $18.6 billion, NetApp, Inc. (NTAP) is a California-based technology company specializing in intelligent data infrastructure and data management solutions for enterprise and cloud environments. Founded in 1992, the company provides a suite of products and services that help organizations store, manage, protect and mobilize data across on-premises, hybrid cloud and public cloud platforms. Its offerings include unified data storage systems, data management software (notably the ONTAP ...

Core Viewpoint - NetApp Inc. (NASDAQ:NTAP) has experienced significant stock price declines following a downgrade from Morgan Stanley, which has raised concerns about future revenue growth due to reduced enterprise budgets and rising memory costs [1][2]. Group 1: Stock Performance - NetApp's stock fell by 9.34% to close at $94.11, marking a continuation of losses for a second consecutive day [1]. - The downgrade from Morgan Stanley has led to a revised price target of $89, down from $117, reflecting a 24% decrease [2]. Group 2: Market Conditions - The downgrade is attributed to reduced enterprise budgets for storage hardware and increasing memory costs, which are expected to slow revenue growth in 2027 [2]. - Despite the potential growth in the artificial intelligence sector, NetApp's 10% revenue exposure to public cloud services is not anticipated to significantly impact results in the near term [3]. Group 3: Company Developments - NetApp has recently appointed Paul Fipps to its board of directors, who brings over 20 years of experience in technology-driven growth and customer transformation [4].

Summary of the Conference Call Transcript Industry Overview - The report covers the **US IT hardware and distributors** sector, with specific focus on companies such as **DELL**, **Hewlett Packard Enterprise (HPE)**, **NetApp (NTAP)**, **TD SYNNEX (SNX)**, **Penguin Solutions (PENG)**, **Super Micro Computer Inc (SMCI)**, and **HP Inc (HPQ)** [1][4]. Core Insights Hardware Demand Environment - General consensus among investors indicates that **neocloud AI infrastructure demand** will remain strong through **2026**. However, there is skepticism regarding the demand outlook for **PCs**, **general servers**, and **storage**, with concerns that these markets may be adversely affected by **memory price hikes** and shortages. The forecast for **PC shipments** in **2026** is projected to decline by **4% year-over-year**, which is more pessimistic than the **IDC's** estimate of a **2% decline** [4][5]. Company-Specific Feedback - **DELL (Buy)**: Investors expressed concerns about potential **margin pressure** due to a deteriorating PC market, demand for core **ISG** (general server, storage), and the sustainability of the **AI server opportunity**. However, DELL is viewed as better positioned than smaller competitors due to its scale and business mix [4][5]. - **HPE (Buy)**: Discussions focused on execution risks in the **Networking** business, particularly regarding the integration of **Juniper's** offerings. While HPE is considered attractively valued, investors are uncertain about near-term catalysts for earnings revisions [4][5]. - **HPQ (Sell)**: Investors largely agree that the current PC market conditions will negatively impact HPQ's **Personal Systems** business, affecting both top-line growth and margins [5]. - **SMCI (Sell)**: There is a consensus that SMCI's margins will be pressured due to its business mix and product transitions. Investors are particularly interested in understanding SMCI's working capital needs against its revenue growth expectations [5]. Least Push Back - There was minimal opposition to the ratings on **HPQ** and **SMCI**, indicating a general agreement on the challenges these companies face [4][5]. Valuation and Key Risks DELL - **Rating**: Buy - **Target Price**: $165, based on a **12.0X** NTM+1Y EPS [6]. - **Key Risks**: Weaker than expected demand in the consumer and commercial PC markets, enterprise IT spending, and pricing pressures due to excess inventory [7]. HPE - **Rating**: Buy - **Target Price**: $31, reflecting **11X** NTM+1Y EPS [8]. - **Key Risks**: Lower corporate IT spending, competition from white box manufacturers, and integration challenges with Juniper [9]. NTAP - **Rating**: Buy - **Target Price**: $128, reflecting **14X** NTM+1 EPS [10]. - **Key Risks**: Supply shortages, demand declines for on-premise storage, and increased competition [11]. SNX - **Rating**: Buy - **Target Price**: $180, based on **11.0X** NTM+1Y EPS [12]. - **Key Risks**: Prolonged lower IT spending and shifts in sales models that bypass distributors [13]. PENG - **Rating**: Buy - **Target Price**: $25, based on a blended valuation methodology [14]. - **Key Risks**: Memory market cyclicality and competition from OEMs [14]. SMCI - **Rating**: Sell - **Target Price**: $26, reflecting **9X** NTM+1 EPS [16]. - **Key Risks**: Demand for AI servers and market share gains [16]. HPQ - **Rating**: Sell - **Target Price**: $21, based on **7.5X** NTM+1 EPS [17]. - **Key Risks**: Better-than-expected PC demand and recovery in office and consumer demand [17]. Additional Considerations - The report emphasizes the importance of understanding the broader market dynamics and individual company strategies in navigating the current challenges in the IT hardware sector [4][5].

Group 1: Stock Market Movements - Logitech (LOGI), NetApp (NTAP), and CDW (CDW) saw declines of 6%, 4%, and 2% respectively after Morgan Stanley downgraded all three, citing a "perfect storm" for IT hardware due to the slowest corporate spending in 15 years outside of COVID-19 [4] - The downgrade was influenced by a 4Q CIO survey indicating softer demand, with resellers expecting 30%-60% of customers to cut budgets for PCs, servers, and storage amid rising component prices [4][5] - The hardware down-cycle is expected to last three to five quarters, with CDW downgraded to Equal-Weight (PT $141), Logitech to Underweight (PT $89), and NetApp to Underweight (PT $89) [5] Group 2: NYSE Developments - The New York Stock Exchange (NYSE) is developing a platform for 24/7 trading of tokenized U.S.-listed equities and ETFs using blockchain technology [5][6] - This platform aims to enable instant settlement, dollar-sized orders, and stablecoin-based funding, although the launch date has not been disclosed [6] - The initiative is part of Intercontinental Exchange's (ICE) broader digital strategy, which includes enhancing clearing infrastructure for 24/7 trading and supporting tokenized deposits [7][8] Group 3: Tesla and EV Market - Tesla (TSLA) is expected to benefit from Canada's decision to reduce tariffs on Chinese-made electric vehicles (EVs) from 100% to 6.1%, allowing 49,000 EVs to be imported annually [9][10] - The EV quota may increase to 70,000 within five years, with half reserved for vehicles priced under C$35,000 ($25,192), which does not include Tesla's models [11] - Tesla's largest plant in Shanghai is already equipped to produce a Canada-specific version of its Model Y, which was previously shipped to Canada before the tariff imposition [10]

Group 1: Core Insights - Goldman Sachs has resumed coverage of several companies in the IT hardware and distribution sector, assigning "buy" ratings to Dell Technologies, HPE, SYNNEX, and Penguin Solutions, while giving "sell" ratings to HP and Super Micro Computer, and a "neutral" rating to Insight Enterprises [1] - The IT hardware and distribution industry experienced a modest return of only 4% in 2025, compared to a 16% increase in the S&P 500, with expectations for continued volatility in 2026 due to fluctuating AI market enthusiasm and rising input costs [1][2] Group 2: Investment Themes - Analysts believe that patient investors will be rewarded, as the industry presents stock-picking opportunities, particularly for stocks with upward consensus expectations and attractive performance in three key investor topics: sustainability of AI demand, the stage of upgrade cycles for PCs, servers, storage, and campus networks, and the impact of higher input costs on margins and demand [2] - The rationale for the "buy" ratings on Dell Technologies, HPE, SYNNEX, Penguin Solutions, and NetApp includes Dell's strong earnings growth potential related to AI, HPE's attractive business transformation, NetApp's undervalued high-margin public cloud business, SYNNEX's resilient distribution model, and Penguin Solutions' accelerated profit growth through portfolio transformation [2] Group 3: Market Outlook - In terms of AI infrastructure demand, analysts expect strong growth in new cloud (GPU-as-a-service) demand, despite potential quarterly fluctuations due to product transitions and an expanding XPU ecosystem [3] - For traditional servers and enterprise storage, there is cautious optimism for revenue growth driven by data center modernization trends in 2026, while closely monitoring demand elasticity in an inflationary pricing environment and anticipating that higher DRAM/NAND costs will largely be passed on to customers [3] - The outlook for personal computers in 2026 is expected to be weaker than current market expectations due to diminished upgrade incentives and rising prices, with the impact of rising input costs on margins and demand being a key issue for 2026 [3]

Core Insights - NetApp Inc. has faced a challenging period with an 11.3% decline in stock over the past three months, underperforming the broader Computer and Technology sector and the Computer Storage Devices Industry [1][8] Price Performance - NTAP closed at $105.39, down 17.5% from its 52-week high of $127.78, raising questions about whether this decline presents an opportunity or indicates deeper business issues [4] Causes of Price Decline - The recent underperformance is attributed to macroeconomic caution and company-specific challenges, including an uncertain global outlook and softness in the U.S. Public Sector [5] - Deferred storage cycles and infrastructure refreshes due to worsening macro conditions could lead to top-line erosion, compounded by increasing competition from companies like Pure Storage [6] Key Growth Catalysts - The all-flash array business is a significant growth driver, with demand for modern all-flash arrays increasing, particularly for the C-series and ASA products [9] - At the end of Q2 fiscal 2026, 46% of systems in the installed base were all-flash, with All-Flash Array revenues rising 9% year over year to $1 billion [10] - Keystone storage-as-a-service offering saw a 76% year-over-year revenue growth, contributing to a 13.8% increase in Professional Services revenues [11] - Public Cloud segment revenues improved 2% to $171 million, with first-party and marketplace storage services growing 32% [12][13] AI and Long-Term Growth - NetApp is focused on capturing a larger share of the AI market, closing approximately 200 AI infrastructure and data-modernization deals in Q2 [14] - The launch of AFX and AI Data Engine enhances enterprise-grade AI capabilities, indicating strong integration into the evolving AI stack [15] Financial Performance - In the last reported quarter, revenues were $1.71 billion, a 3% year-over-year increase, with non-GAAP operating income rising 12% to $530 million [16] - The company ended the quarter with $3 billion in cash and cash equivalents, providing flexibility for growth strategies [17] Shareholder Returns - NTAP returned $353 million to shareholders through dividends and share repurchases in Q2, with a dividend of 52 cents per share announced for January 2026 [18] Valuation - NetApp's forward 12-month price-to-earnings ratio is 12.52X, below the industry average of 20.86X [19]

Company Performance - NetApp reported revenues of $1.71 billion for the last quarter, reflecting a 3% year-over-year increase [1] - Non-GAAP operating income rose by 11.6% year-over-year to $530 million, with a non-GAAP operating margin of 31.1%, up from 28.6% [1] - Non-GAAP earnings per share were $2.05, exceeding the Zacks Consensus Estimate by 8.5% and increasing by 9.6% year-over-year [1] Financial Position - As of October 24, 2025, NetApp had $3 billion in cash, cash equivalents, and investments, with long-term debt at $2.486 billion [2] - The company generated net cash from operations of $127 million and free cash flow of $78 million [2] - NetApp returned $353 million to shareholders through dividends and share repurchases in the fiscal second quarter [2] Strategic Focus - NetApp is concentrating on capturing a larger share of the AI market, closing approximately 200 AI infrastructure and data-modernization deals in the fiscal second quarter [3] - The company invested nearly $49 million in property and equipment during the fiscal second quarter [3] - New product launches, including AFX and the AI Data Engine, enhance NetApp's enterprise-grade AI data capabilities [3] Shareholder Returns - The company announced a dividend of 52 cents per share, payable on January 21, 2026, to shareholders of record as of January 2 [2] - Continuation of buybacks and dividends is seen as a strategy for NetApp, contingent on its ability to convert demand into strong margins and effective investments [4]

Group 1 - The artificial intelligence trade is expected to significantly impact GDP growth in 2025 and 2026, with companies leading this sector likely to be viewed as potential winners [1] - There is increasing interest in "picks-and-shovels" plays in the AI space, with companies like NetApp (NTAP) being highlighted as potential top picks for investors [2] - NetApp's stock has experienced a year-to-date decline of nearly 7%, but it has surged around 50% from its lows in April, indicating volatility and the importance of market timing [4][5] Group 2 - NetApp's fundamentals show relatively low margins at around 18%, but it boasts a high triple-digit return on equity and a price-sales multiple of 3.3 times, which is considered cheap for AI-related stocks [7] - The forward price/earnings ratio for NetApp is just 17 times, suggesting it is favorably valued compared to other AI stocks [7]

Company Overview - NetApp, Inc. (NASDAQ:NTAP) specializes in enterprise data management software and storage systems, aiding organizations in managing, protecting, and transferring data across on-premises and cloud environments [2] Recent Developments - On December 9, 2023, NetApp announced an expanded partnership with F5 (NASDAQ:FFIV) aimed at facilitating the movement of large AI data sets while enhancing long-term security. This collaboration supports AI workloads and S3 storage, improves data flow through traffic management tools, and incorporates protection against future quantum-related threats using TLS 1.3 and quantum-resistant encryption [2] Investment Perspective - While NetApp is recognized as a viable investment, there are opinions suggesting that certain AI stocks may present greater upside potential and lower downside risk. The company is considered to be in a good business sector, but the current year has not been favorable for its stock performance [1][3]