NetApp's Recent Momentum Should Continue; JMP Upgrades

JMP’s John Lucia believes the recent momentum in NetApp Inc. NTAP's would persist, driven by the company’s enhanced competitive position, along with a large opportunity to upgrade its installed based to all-flash.

The analyst upgraded the rating on the company from Market Underperform to Market Perform.

Sustained Momentum

Following recent industry discussion and NetApp’s analyst day, Lucia mentioned that he was “incrementally confident” that the company would be able to sustain modest revenue growth, largely driven by continued upgrades to all-flash among its installed base.

Reasons For Upgrade

The analyst stated that there were three key reasons for the upgrade in rating.

Firstly, Lucia believes “the all-flash upgrade cycle remains in early innings and our checks suggest NetApp is better positioned to address the opportunity within its installed base.”

However, the analyst also believes that new customer acquisition would continue to be a challenge for the company.

Secondly, NetApp is expected to benefit from the disruption due to the Dell Inc. DELL)/EMC Corporation EMC) merger, with check suggesting that Dell/EMC customers and resellers were increasingly looking at competitive options.

Lastly, Lucia believes that “NetApp has demonstrated an ability to deliver strong operating margins and we expect continued execution on that front as the company leverages an improved operating model.”

The EPS and revenue estimates for FY18 have been modestly raised.

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