Has NetApp Growth Peaked? (NTAP)

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NetApp, Inc. (NASDAQ: NTAP) has been a great growth story and it has ridden the wave of network storage solutions and the cloud long before the most recent interest surged in storage and the cloud.  That growth may be peaking.

Shares of NetApp are soft on what is a strong market day elsewhere in technology after a boutique firm called FBN Securities downgraded the stock.  This brokerage and research firm is a relatively unknown firm to Main Street, but the new rating went down to “Market Perform” from a prior “Outperform” based upon the notion that channel checks from the analyst are signalling weaker sales and growing fears of competition coming in the months ahead.

After a $42.02 close on Tuesday, the stock is still well off of last year’s highs as the 52-week trading range is $33.00 to $56.49.  After a 2.7% drop to $40.90 so far today, Yahoo! Finance still lists a market capitalization rate of $14.8 billion.  NetApp is often considered the storage stock that was always too expensive to acquire for another big player and it is likely now too valuable on a raw dollar basis.

Thomson Reuters had a consensus target of $2.38 EPS on $6.22 billion in projected fiscal April-2012 sales, with those targets rising to $2.73 EPS and $6.95 billion in sales for the following fiscal year.  The multiples are not expensive, but the raw dollar figure of nearly $15 billion in addition to whatever premium the company might want would lower the chances of this company being acquired.

It is surprising to see such a negative reaction from a boutique firm’s downgrade but such is life on some days.