Startups, Coming IPOs Are Threatening NetApp
In a report published Wednesday, Longbow analyst Joe Wittine maintained a Neutral rating on NetApp, Inc. (NASDAQ: NTAP). CY2Q reseller surveys indicate that the company's fundamentals remain weak, implying that NetApp might have lost its brand equity.
Fundamentals do not seem to be changing, although "NTAP under new CEO George Kurian has multiple options to potentially get the shares moving through (1) larger cost-cuts, (2) more cash deployment, and (3) a more aggressive tone on organic/inorganic investments," Wittine stated.
"Our discussions with storage resellers leave us unconvinced the company can stem its share losses, particularly with the startup competition growing stronger and some approaching IPOs," the Longbow report explained.
The analyst expects the company's large enterprise customers to continue to post a significant challenge. During CY1Q, large customers were seen delaying hardware refreshes, while extending the life of existing on-premise gear. The analyst expects this trend to have accelerated since the last half of May.
Channel headwinds are also expected for Netapp, with discussions with the company's resellers during CY2Q not showing any meaningful change in tone or increasing enthusiasm, despite the stepped-up migration services and training.
According to the Longbow report, "[T]he channel's downbeat attitude regarding ONTAP 8.3 should make new customer acquisition exceptionally difficult, particularly with competition from next-gen architectures... which NTAP lacks."
The "surprisingly weak" FY2016 guidance was issued under the previous CEO, Tom Georgens. The analyst, therefore, believes that the new CEO, George Kurian, would opt to "kitchen sink" the sales expectations for FY2016 further with a range that is better quantified.
Latest Ratings for NTAP
Aug 2015 | Summit Research | Downgrades | Sell | |
Jul 2015 | Pacific Crest | Upgrades | Underweight | Sector Weight |
Jun 2015 | Jefferies | Maintains | Hold |
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