NetApp (NASDAQ:NTAP) Shares Gap Down - Time to Sell?

Key Points

• NetApp shares initially gapped down despite strong fiscal Q1 results, with revenue of about $2.03 billion and non-GAAP EPS of $2.58 both well above analyst expectations.
• Management raised fiscal 2027 revenue and adjusted EPS guidance, supported by demand for AI, all-flash storage and hybrid-cloud services, but weaker free cash flow, declining gross margins and higher component costs pressured the stock.
• Analyst sentiment remains mixed: the consensus rating is Hold with an average price target of $191.69, while NetApp also declared a quarterly dividend of $0.52 per share.

NetApp, Inc. (NASDAQ:NTAP - Get Free Report)'s share price gapped down before the market opened on Thursday . The stock had previously closed at $180.77, but opened at $161.95. NetApp shares last traded at $182.6510, with a volume of 1,382,660 shares trading hands.

Key Headlines Impacting NetApp

Here are the key news stories impacting NetApp this week:

• Positive Sentiment: NetApp reported fiscal Q1 FY2027 revenue of approximately $2.03 billion, up nearly 30% year over year and well above the roughly $1.84 billion consensus estimate. Non-GAAP EPS was $2.58, also comfortably ahead of expectations near $2.12. NetApp Stock Tanks Despite Strong Q1 Earnings Print
• Positive Sentiment: Management raised its fiscal 2027 outlook to approximately $7.98 billion-$8.23 billion in revenue and $9.73-$10.03 in adjusted EPS. Second-quarter guidance also exceeds consensus, signaling continued demand from artificial intelligence, all-flash storage and hybrid-cloud customers. NetApp FY2027 Forecast and Raised EPS Outlook
• Positive Sentiment: Analysts lifted several price targets following the results. Morgan Stanley raised its target to $191, Susquehanna to $195, and Goldman Sachs maintained a $210 target and Buy rating, citing stronger guidance and cloud momentum.
• Positive Sentiment: NetApp announced that AWS Transform now supports migrations to Amazon FSx for NetApp ONTAP, potentially making it easier for enterprises to move storage and database workloads to AWS. The company also declared a quarterly dividend of $0.52 per share, payable October 28.
• Neutral Sentiment: Analyst opinion remains mixed: Morgan Stanley and Susquehanna kept Equal Weight or Neutral ratings despite higher targets, while Wedbush raised its target only to $170, below the recent trading level.
• Negative Sentiment: The post-earnings selloff reflects weaker free cash flow and profitability concerns. Operating cash flow was about $503 million and free cash flow $401 million, while gross margin declined and management warned that second-quarter gross margin would fall sequentially as product mix and component costs pressure results. NetApp Earnings and Free Cash Flow Decline

Analyst Upgrades and Downgrades

A number of analysts have recently weighed in on NTAP shares. Wedbush boosted their target price on shares of NetApp from $150.00 to $170.00 and gave the stock a "neutral" rating in a report on Thursday. Susquehanna upped their target price on shares of NetApp from $185.00 to $195.00 and gave the company a "neutral" rating in a research report on Thursday. Weiss Ratings raised shares of NetApp from a "hold (c+)" rating to a "buy (b-)" rating in a report on Monday, June 8th. Wall Street Zen lowered NetApp from a "strong-buy" rating to a "buy" rating in a research report on Wednesday, July 29th. Finally, Wells Fargo & Company boosted their price objective on NetApp from $180.00 to $190.00 and gave the stock an "equal weight" rating in a research note on Thursday. Five equities research analysts have rated the stock with a Buy rating and ten have issued a Hold rating to the stock. According to data from MarketBeat.com, NetApp presently has a consensus rating of "Hold" and a consensus price target of $191.69.

NetApp Trading Up 3.4%

The stock's 50-day moving average price is $177.45 and its 200 day moving average price is $139.96. The company has a debt-to-equity ratio of 1.84, a current ratio of 1.44 and a quick ratio of 1.39. The firm has a market capitalization of $36.67 billion, a PE ratio of 29.34, a price-to-earnings-growth ratio of 2.49 and a beta of 1.44.

NetApp (NASDAQ:NTAP - Get Free Report) last posted its quarterly earnings results on Wednesday, September 2nd. The data storage provider reported $2.58 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $2.12 by $0.46. The business had revenue of $2.02 billion for the quarter, compared to the consensus estimate of $1.84 billion. NetApp had a return on equity of 117.23% and a net margin of 18.43%.The business's revenue was up 29.9% compared to the same quarter last year. During the same quarter in the prior year, the company earned $1.15 EPS. NetApp has set its FY 2027 guidance at 9.730-10.030 EPS and its Q2 2027 guidance at 2.540-2.640 EPS. On average, sell-side analysts expect that NetApp, Inc. will post 7.34 EPS for the current fiscal year.

NetApp Announces Dividend

The firm also recently disclosed a quarterly dividend, which will be paid on Wednesday, October 28th. Stockholders of record on Friday, October 9th will be issued a dividend of $0.52 per share. This represents a $2.08 annualized dividend and a dividend yield of 1.1%. The ex-dividend date is Friday, October 9th. NetApp's dividend payout ratio is currently 32.70%.

Insider Transactions at NetApp

In related news, EVP Elizabeth M. O'callahan sold 1,000 shares of the stock in a transaction that occurred on Monday, August 10th. The shares were sold at an average price of $193.82, for a total value of $193,820.00. Following the completion of the transaction, the executive vice president directly owned 30,297 shares of the company's stock, valued at $5,872,164.54. This trade represents a 3.20% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available through this hyperlink. Also, President Cesar Cernuda sold 2,608 shares of NetApp stock in a transaction on Monday, August 17th. The stock was sold at an average price of $204.48, for a total transaction of $533,283.84. Following the sale, the president owned 46,530 shares of the company's stock, valued at $9,514,454.40. The trade was a 5.31% decrease in their ownership of the stock. The disclosure for this sale is available in the SEC filing. Over the last quarter, insiders sold 55,072 shares of company stock valued at $8,719,520. 0.36% of the stock is currently owned by company insiders.

Institutional Investors Weigh In On NetApp

Several hedge funds have recently modified their holdings of NTAP. West Financial Advisors LLC purchased a new position in shares of NetApp in the second quarter valued at approximately $37,000. Park Square Financial Group LLC increased its position in shares of NetApp by 68.7% during the fourth quarter. Park Square Financial Group LLC now owns 253 shares of the data storage provider's stock worth $29,000 after purchasing an additional 103 shares in the last quarter. Gen Wealth Partners Inc purchased a new stake in shares of NetApp during the fourth quarter worth approximately $30,000. DV Equities LLC acquired a new position in NetApp in the 4th quarter valued at $30,000. Finally, Measured Wealth Private Client Group LLC acquired a new position in NetApp in the 3rd quarter valued at $35,000. 92.17% of the stock is owned by hedge funds and other institutional investors.

About NetApp

NetApp, Inc NASDAQ: NTAP is a data management and storage company that delivers hybrid cloud data services for applications and data. Founded in 1992 as Network Appliance and rebranded as NetApp in 2008, the company is headquartered in Sunnyvale, California. NetApp's offering focuses on enabling organizations to store, manage, protect and move data across on-premises environments and major public clouds.

The company's product portfolio centers on the ONTAP data management software and a range of storage systems and services built around it.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

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