Shares of NetApp jumped 5.1% in Tuesday’s extended market trading after the software company reported better-than-expected 2Q results driven by its cloud business and the launch of new products and services. The enterprise storage and cloud management solution provider’s 3Q sales and EPS outlook also exceeded analysts’ estimates.
NetApp’s (NTAP) 2Q revenues increased 3.6% to $1.42 billion year-on-year and surpassed analysts’ expectations of $1.31 billion. Meanwhile, its adjusted EPS of $1.05 fell 3.7% year-over-year but came ahead of the Street’s call of $0.73.
“In the second quarter, NetApp again delivered strong results, successfully executing against our plan to scale our cloud business while growing in the storage market. We also introduced significant new products and services which further advance our Data Fabric strategy,” said NetApp’s CEO George Kurian. Kurian added “We are a primary beneficiary of the increasing importance of data and are uniquely positioned to help customers with their digital transformations. (See NTAP stock analysis on TipRanks)
For 3Q, NetApp projects revenues between $1.34 billion and $1.49 billion, which at the mid-point of $1.415 billion is above analysts’ expectations of $1.36 billion. The company’s adjusted EPS forecast of $0.94-$1.02 compares to the Street’s estimates of $0.89.
Ahead of the earnings, Deutsche Bank analyst Jeriel Ong raised the stock’s price target to $50 (7.7% downside potential) from $45 amid expectations that NetApp will report “solid” 2Q results. However, Ong maintained a Hold rating saying that expectations are too high as the stock has already gained 23% since the company’s 1Q results.
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys, 5 Holds and 1 Sell. The average price target stands at $50.57 and implies downside potential of about 6.6% to current levels. Shares have plunged about 13% year-to-date.
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