The Sell Side Reacts To NetApp's Consensus-Beating Q2

Storage and data management company NetApp Inc. NTAP reported forecast-beating second quarter results after the close Wednesday.

A non-GAAP EPS of 81 cents and net revenue of $1.42 billion comfortably beat consensus estimates, which called for 69 cents per share in earnings and $1.38 billion in net revenue.

NetApp's top- and bottom-line guidance for the third quarter of 2018 were also above Street forecasts.

Investors have given their thumbs-up to the results and NetApp shares were trading solidly higher Thursday.

NetApp shares were surging 15.50 percent to $52.92 at the time of writing.

Here's a few sell-side takes on NetApp's Q2:

Narrative Changes From Turnaround Story to 'Restored Grower'

NetApp's above-consensus results and outlook point to the recent share gains extending into the calendar year 2018, Barclays analyst Mark Moskowitz said in a note. The narrative continues to shift from a turnaround story to one of a restored grower, he said.

A favorable multiple rerating is in the cards if NetApp continues outgrowing the storage market while also keeping a lid on costs, the analyst said.

Barclays recommends building or adding to NetApp positions.

The firm has an Overweight rating on NetApp and raised the price target to $56.

NetApp Offers An Attractive Value Investment Opportunity

Shares of NetApp offer an attractive value investment opportunity, said D.A. Davidson analyst Mark Kelleher. The company has has moved aggressively into the flash storage market in the last two years, the analyst said. 

Strategic products continue to provide a strong revenue tailwind, even as the headwind of mature products moderates, Kelleher said. 

D.A. Davidson has a Buy rating on the shares of NetApp and it increased its price target from $53 to $56, incorporating an increased earnings per share estimate.

See also: Barclays: It's Not Too Late To Get In On The 'Goodness' At NetApp

Multiyear Trends Continue

Accelerating results and guidance at NetApp are due to alignment and momentum, Maxim Group analyst Nehal Chokshi said. The acceleration in Q2 2018 revenue growth to 14 percent comes as NetApp's momentum from strategic solutions continues, Chokshi said. 

Maxim reiterated its Buy rating on NetApp and modestly raised its estimates for the company. Maxim increased its 12-month price target for NetApp from $56 to $61.

Momentum Undeniable But Needs to Be Certain of Business Model Expansion

NetApp's momentum is undeniable as it reports the second straight quarter of strong results, said Loop Capital analyst Ananda Baruah. The analyst said he wants to be certain of NetApp's ongoing business model expansion, since further stock appreciation needs to be supported more by fundamentals than by multiple expansion.

NetApp is surprising even itself, with outperformance throughout its product portfolio and across geographies, Baruah said. This has been made possible due to accelerated traction in the company's strategic portfolio, he said.

Loop Capital Markets has a Hold rating on NetApp and increased its price target form $41 to $50.

Valuation Leaves Deutsche Bank Bearish

Deutsche Bank Securities analyst Sherri Scribner maintained a Sell rating on NetApp, as she said its valuation remains higher than that of "legacy" peers.

Deutsche Bank remains cautious on long-term negative trends for the industry and would "avoid names that are solely exposed to on-premise data center storage," Scribner said.

NetApp deserves credit for managing expenses well and upgrading the company's install base to all-flash arrays, the analyst said. 

The firm said it has increased its estimates for NetApp on higher sales expectations and a more positive margin outlook. Deutsche Bank also upped its price target from $27 to $37.

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