NetApp (NTAP) has a very bullish Chaikin Power Gauge rating and reported 1st quarter 2015 earnings after the close on Wednesday, August 13. The company beat analyst earnings estimates by 7% and surprised positively on top line revenues as well. Most importantly, the company guided higher for the 2nd quarter. Management cited increasing demand for the company’s hybrid cloud storage products. This encouraged Needham and Company to upgrade NTAP from a hold to a buy with a price target of $49. Coming on top of Pacific Crest’s upgrade before earnings were reported, it suggests that other analysts may soon join the bullish camp on NTAP where they have been cautious for some time.
The stock responded by spiking higher on Thursday and triggered a Momentum Breakout Buy Signal in Chaikin Analytics, finishing the week at its high of 41.67.
NTAP creates and delivers innovative data management and storage solutions. NetApp helps businesses simplify the complex task of storing, managing and retaining data, thus reducing costs and minimizing risks.
The company has faced three challenges recently: shrinking IT budgets in corporate America, reduced government spending because of sequestration cutbacks and the increasing popularity of cloud computing offerings from Amazon (AMZN), Google (GOOG), Rackspace (RAX) and the like. NTAP’s response has been a restructuring, cutting costs to counter lower revenues and partnering with competitors like Amazon’s EC2 cloud computing facility, providing private storage that can be integrated with the Amazon cloud’s storage.
NetApp has been buying back its stock but still has $5.6 billion in cash which can be used to buy back additional shares or make a strategic acquisition to bolster their technology offerings. Because of the recent restructuring which cut costs, the company’s return on equity has been rising, while the company has bested analyst estimates in each of the past 8 quarters in spite of a challenging revenue environment.
Pacific Crest Securities, a major technology research firm, upgraded their rating a week ago on NTAP to outperform while raising their earnings estimate for 2015 to $2.96, well above Wall Street consensus estimates at the time. They set a price target of $46 for NetApp citing improving demand for NTAP’s storage solutions. Needham & Company as cited above has a $49 price target and an earnings estimate of $3.08 for 2015.
The stock went into a tailspin after the February earnings report and has been slowly rebuilding technical strength. NTAP broke above its long-term downtrend in mid-July when the Chaikin Power Gauge rating turn bullish. However NTAP is still well off its 52 week high of 45.85 giving it plenty of upside potential.
NTAP has a very bullish Chaikin Power Gauge rating that is driven by bullish Financial Metrics and bullish Expert Opinions, which reflect increasingly bullish analyst ratings, upward earnings estimate revisions and positive industry group strength. The Bullish Technical rating is based on positive Chaikin Money Flow and NTAP’s renewed strength relative to the market.