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NetApp (NASDAQ:NTAP) shares fell nearly 2% in premarket trading on Tuesday after Raymond James downgraded the data storage and services company.
“We downgrade our rating on NetApp to Market Perform from Outperform after considering the intermediate-term challenges facing the storage market, as well as our belief that product margin has peaked,” analyst Simon Leopold wrote in an investor note.
“Among data center equipment categories, Storage sounds slower than servers and networking,” Leopold continued. “We are optimistic regarding NetApp’s new product cycles and the [artificial intelligence] related prospects as tailwinds for [calendar 2025]. NAND pricing is only just bottoming and presents a risk as pricing increases sharply in CY24. NetApp has positioned itself for AI opportunities, and we expect enterprise initiatives ramp in 2025.”
Leopold estimates the company will generate $6.23B in revenue and earn $6.17 per share in fiscal 2024 and $6.45B and $6.49 per share in fiscal 2025.
Hybrid cloud makes up roughly 45% of NetApp’s business, and with estimates aligned with consensus, it “reduces the justification for an outperform rating,” Leopold said.
