Barclays: It's Not Too Late To Get In On The 'Goodness' At NetApp

NetApp Inc. (NASDAQ: NTAP) rebounded from September lows and traded above a significant resistance Thursday, with an earnings report set for next week.

The Analyst

Barclays' Mark Moskowitz.

The Rating

Moskowitz upgraded NetApp from Underweight to Overweight and increased its price target from $38 to $52. (See Moskowitz' track record here.) 

The Thesis

The analysts said he missed the first act of the data company's turnaround, but he expects the next act to push the stock higher. Over the next six to 12 months, NetApp is going to gain market share in all-flash arrays, and there could be a temporal easing in cloud related headwinds, Moskowitz said. Valuation multiples are also expected to increase, the analyst said. 

In the long term, there are risks in the form of cloud's deflationary impact and increased competition in the storage market, but investors are aware of such problems, Moskowitz said. Barclays is projecting better-than-expected earnings next week.

While the long-term risk for cloud is meaningful, headwinds could ease as customers are increasingly adopting a hybrid cloud model, Moskowitz said. Attractive margin, free cash flow and cash per share metrics should rerate NetApp's valuation multiples higher, with an increase in P/E to 13.5x from 11x and an increase in EV/EBITDA to 7x from 5x, Moskowitz said. 

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