Shares of NetApp (NASDAQ:NTAP) gained 1.2% in pre-open trading Wednesday after analysts at Morgan Stanley upgraded the stock saying it is pricing in a recovery.
Analysts upgraded the stock to Equal-weight from Underweight and raised the price target to $74 from $60.
“With estimates largely derisked, NTAP's valuation is already pricing in a recovery,” the analysts commented. “Moving to EW. We would need to see evidence of meaningful cloud reacceleration to get more positive.”
The analysts noted NTAP has surged ~19% since May's FQ4 earnings, driven by a belief in a catalyst path ahead with cloud spend recovery and potential AI revenue. It's up 30%+ YTD (vs. NASDAQ +35% YTD). Hardware benefits from an early cycle, but they see more attractive valuations elsewhere in coverage based on EPS growth.
They expect the stock to remain flat or soft into August earnings due to its recent rapid increase and more muted checks. Further positive prospects hinge on significant cloud business reacceleration, expected around late CY23 or early CY24, leading to multiple expansions.