By Sam Boughedda
Jefferies analysts initiated coverage of NetApp (NASDAQ:NTAP) with a Buy rating and $88 price target in a note to investors on Monday.
The analysts said NetApp is hitting the sweet spot with its all-flash and public cloud offerings.
"We like NetApp's data center exposure and see a positive medium-term demand environment driven by digitization and data growth," wrote the analysts, who initiated a Hold rating for Dell (NYSE:DELL) in a separate note on Monday. "Gartner expects the storage systems market to grow at a 1.5% CAGR through CY'26 with All-Flash Arrays growing faster than the market at 4.6%. Based on our checks, enterprise spending has remained solid in the face of macro uncertainty. Enterprises are pushing forward with their digitization objectives to enhance business resilience if faced with another pandemic-like event."
In addition, the analysts said the firm particularly likes NetApp's position in the public cloud and the tailwind they're getting from the All-Flash transition, while they don't believe the current valuation gives them enough credit for the 43% recurring revenue and 31% software content and growing.
"They have customer-managed versions of their OS ONTAP in all the major marketplaces as well as fully managed versions branded and sold by the cloud providers themselves. NetApp is the only storage vendor that’s fully integrated with the public clouds, with their sales forces selling NetApp services as if it was their own. NetApp’s Public Cloud segment has ramped from a small base to $584m in ARR and growing at 50% Y/Y," they explained.