By Senad Karaahmetovic
Shares of NetApp (NASDAQ:NTAP) are trading over 5% lower in premarket Thursday after the company reported lighter-than-expected FQ4 guidance.
For its fiscal third quarter, NetApp reported an EPS of $1.37 on revenue of $1.53 billion, which compares to the average analyst estimate for earnings of $1.31 per share on revenue of $1.61B. Overall, revenue fell 5.5% as hybrid cloud sales declined 8.5% to $1.38B, missing the $1.46B consensus.
“In Q3, we executed well on the elements under our control in the face of a weakening IT spending environment and continued cloud cost optimization,” said George Kurian, chief executive officer.
For this quarter, the company sees EPS in the range of $1.30 and $1.40, missing the consensus of $1.43. Revenue is seen between $1.48B and $1.63B, again below the $1.66B estimate.
“We are confident that we remain well positioned to take advantage of the secular growth trends of data-driven digital and cloud transformations. Building on that solid foundation, we are sharpening our execution to accelerate near-term results while strengthening our position when the spending environment rebounds,” added Kurian.
For 2023, the midpoint of the company’s guidance for EPS of $5.40 came in line with analysts' expectations.
Morgan Stanley analysts reiterated an Underweight rating on the NTAP stock as FQ3 results and guidance signal stronger-than-expected macro headwinds. The analysts previously downgraded NTAP in December, citing expectations that the weakness in demand would continue.
We “remain cautious on multiple given pullback in spend to continue in NT, particularly with cloud; earnings power protected with RIF, limiting valuation downside,” they said in a client note.
Stifel analysts lowered estimates to reflect “below seasonal trends through the first half of FY24, with an expected return to growth and margin expansion in 2H.”
“We maintain our Hold rating and $75 price target, or 13.7x forward earnings,” they wrote.