On Wednesday, BofA Securities updated its analysis of NetApp (NASDAQ:NTAP), a company specializing in data storage and management. The firm raised the stock price target to $85.00 from the previous $78.00 while maintaining an Underperform rating on the stock. The revision reflects the anticipated benefits for NetApp from the growing demand for storage driven by increased AI workloads.
NetApp's CloudOps solutions, which provide AI-optimized data infrastructure, have been identified as a key factor in the company's recent success. These solutions are unified, scalable, and high-performance, aligning with the market's needs. NetApp has seen a positive impact from AI demand for over five years, with management highlighting proven use cases in predictive AI.
In the recent financial quarter, F3Q24, NetApp reported a 21% year-over-year growth in its All Flash Arrays (AFA) revenue, reaching an annualized revenue run rate of $3.4 billion. The company experienced robust demand for its C-series all-flash arrays and launched a SAN-optimized AFA that exceeded expectations. Management also noted the potential to expand in the approximately $20 billion SAN market.
The company has secured several significant customer wins in the last quarter, with AI-related deals including large 8-figure agreements for NVIDIA (NASDAQ:NVDA) SuperPOD and BasePOD deployments. Despite the positive developments, BofA Securities reiterated the Underperform rating, citing potential macroeconomic and execution risks that could impact estimates. However, it acknowledged that NetApp's margins have been more resilient than previously forecasted.
The new price objective is based on a 13x multiple of the calendar year 2025 estimated earnings per share of $6.51, as BofA Securities moves to a valuation based on the calendar year 2025 estimates.
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