Why NetApp Is Getting Absolutely Crushed

NetApp Inc. (NASDAQ: NTAP) shares were crushed on Friday after the firm announced preliminary results for the first quarter of fiscal 2020. A couple analysts issued not-so-favorable calls against the stock as well.

First-quarter fiscal 2020 net revenues are expected to be in the range of $1.22 billion and $1.23 billion, which is a decline of approximately 17% from the first quarter of fiscal 2019. At the same time, earnings per share (EPS) are expected to come in at $0.55 to $0.60. The consensus estimates for the fiscal first quarter are $0.82 in EPS and $1.38 billion in revenue.

Note that net revenues in the first quarter of fiscal 2019 included $90 million from enterprise software license agreements that did not repeat in the fiscal 2020 first quarter.

These preliminary results are below the company’s previously stated guidance for the quarter issued on May 22, 2019, which included a range of $1.315 billion to $1.465 billion for net revenues, and $0.78 to $0.86 in EPS.

CEO George Kurian commented:

While we are disappointed that our preliminary results for the first quarter are lower than we had previously anticipated, we remain confident in our long-term strategy and the health of our business model. Our customer conversations indicate that our hybrid multicloud portfolio of solutions is the right one. We believe we can return to growth over time by prudently reallocating investments to expand sales coverage and accelerate our participation in the growing Private Cloud and Cloud Data Services markets.

Here’s what a few analysts had to say:

  • Cross Research downgraded the stock to Hold from Buy.
  • Loop Capital maintained a Buy rating with a $60 price target.
  • Merrill Lynch downgraded it to a Neutral rating from Buy.
  • Piper Jaffray downgraded it to Neutral from Overweight and lowered the price target to $48 from $75.

Shares of NetApp were last seen down about 20% at $46.00, in a 52-week range of $45.55 to $88.08.