NetApp ( NASDAQ: NTAP ) shares fell more than 2% in early trading on Thursday as investment firm Credit Suisse downgraded the cloud services and networking company after it reported a mixed third-quarter.
Analyst Shannon Cross lowered her rating on NetApp ( NTAP ) to neutral from outperform, noting this is the second quarter in a row of "disappointing" results.
"We would be more constructive on the stock once NetApp successfully realigns its go-to-market, improves execution in Public Cloud and recaptures share in all flash which underperformed due to gaps in the portfolio (new product line announced but we think meaningful traction will take a few quarters)," Cross wrote.
Cross added that even though NetApp ( NTAP ) should see lower component and supply costs, restructuring efforts and increased focus on spending to offset the impact to margins and cash flows.
During the third-quarter, NetApp ( NTAP ) earned $1.37 per share, excluding one-time items as revenue declined 5% year-over-year to $1.53B. Analysts were expecting adjusted earnings of $1.31 per share on $1.61B in revenue.
It also generated $1.57B in billings, down from $1.76B in the year-ago period.
Looking ahead, NetApp ( NTAP ) expects fourth-quarter revenue to be between $1.475B and $1.625B, with adjusted earnings between $1.30 and $1.40 per share.
Consolidated gross margins for the full-year are expected to be between 66% and 67%, with operating margins between 23% and 24%, along with adjusted earnings between $5.30 and $5.50 per share.
Earlier this month, hedge fund Point72 Asset Management disclosed it started a position in NetApp ( NTAP ) during the fourth-quarter, while making several other changes to its portfolio .
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 Credit Suisse downgrades after mixed Q3