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NetApp shares (NTAP) fell 21.3% over the last two trading days. Shares of the data storage company fell more than 20.0% yesterday after the company announced its preliminary results for the first quarter of its fiscal year 2020, the company's fiscal year ending in April. He also revised his forecast for the full year on August 2, 2019.
Shares down more than 20.0% this month
NetApp expects a business turnover of between $ 1.22 and $ 1.23 billion in the first quarter, a 17.0% decline from one year to the next. After adjusting for Enterprise Software License Agreements (ELAs), the company's sales are expected to decrease by 12.0% year-on-year. The company has estimated adjusted earnings per share (earnings per share) between $ 0.55 and $ 0.60. Previously, NetApp had forecast sales between $ 1.31 billion and $ 1.46 billion, with EPS between $ 0.78 and $ 0.86 in the first quarter.
For fiscal year 2020, NetApp estimates that sales are expected to drop between 5.0% and 10.0% from one year to the next. NetApp's last call for NetApp results was that revenue would grow by 10 percent in 2020.
Analysts are optimistic about sales in the first quarter of 2020
Wall Street badysts estimate that NetApp will record sales of $ 1.38 billion in the first quarter of fiscal year 2020 in October. That would represent a 6.3% drop from one year to the next compared to a business turnover of $ 1.47 billion in the first quarter of fiscal 2019. Analysts said are also expecting a 21.1% decline in profit in the first quarter. NetApp's earnings are now expected to fall by 44.2% in the first quarter.
Analysts forecasted a turnover of $ 6.24 billion in 2020, up 1.6% from the previous year. NetApp's result should also grow by 7.7%. However, the press release issued by the company yesterday was far from encouraging, leading to a mbadive fall in stock prices.
The CEO of NetApp still hopes
The company attributed the revised forecast to a reduction in technology spending. NetApp Chief Executive George Kurian said, "We are disappointed that our preliminary results for the first quarter are below our expectations, but we remain confident in our long-term strategy and the health of our business model. . The conversations of our customers indicate that our portfolio of hybrid multi-cloud solutions is the right one. We expect to be able to return to growth over time by carefully reallocating investments to expand sales coverage and accelerate our participation in the growing private cloud and cloud data markets. "
NetApp's lower expectations also impacted the price of comparable companies. Cisco Systems (CSCO), Dell Technologies Clbad V (DVMT), Hewlett Packard Enterprise (HPE), VMware (VMW) and Box (BOX) shares fell 4.0%, 9.2%, 6.2% , 8.3% and 3.4%.
NetApp's stock is down 48% since September 2018
NetApp investors showed an upbeat trend from the beginning of 2016 to September 2018. The company's shares posted a staggering return of 310.0% during this period. However, the stock has since decreased by 48.0%. In the fourth quarter of fiscal 2019, the company's results disappointed investors, who faced performance problems as well as currency fluctuations. However, this withdrawal offers an interesting opportunity for investors. NetApp shares trade at 8.5 times multiple term.
While the company is struggling with a turnover and its earnings decline during this year, its fundamentals remain strong. NetApp's revenue growth will most likely come in 2021. The company has significant operating leverage, which means that earnings growth will far outpace revenue growth. In addition, NetApp also has a dividend yield of 4.2% and has increased dividends over the past five years.
This suggests that while the stock is likely to experience short-term fluctuations, it is a boon for investors at current prices. NetApp will release its first quarter results on August 14th.
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