2023-04-20 07:48:32 ET
NetApp ( NASDAQ: NTAP ) shares fell more than 3% in premarket trading on Thursday as Bank of America downgraded the cloud data services company, citing the potential for "challenged" product revenue growth in the coming months.
Analyst Wamsi Mohan lowered his rating on NetApp ( NTAP ) shares to underperform from neutral and lowered the per-share price target to $58 from $70, noting that a weaker demand environment is likely to impact the company, especially in public cloud.
"Although product [gross margins] will see some benefits, we also expect negative leverage from lower [revenues]," Mohan wrote in an investor note.
Mohan added that the 8% reduction in the company's workforce - announced in January - is already in its fourth-quarter guidance and is not likely to be an "incremental tailwind" to current estimates, while the first-half of fiscal 2024 is likely to see additional operating expenses that create "incremental pressure."
The analyst also noted that NetApp ( NTAP ) has lost market share in all flash arrays , something he doesn't expect to see a "reversal in the near-term."
Last week, Stifel upgraded NetApp ( NTAP ), citing potential catalysts in fiscal 2024, including a planned re-organization in sales, lower component costs and the introduction of lower-cost all-flash arrays .
Analysts are largely bullish on NetApp ( NTAP ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates NTAP a HOLD .
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NetApp slips as BofA downgrades, sees 'challenged' product revenue growth