Results: NetApp, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Shareholders will be ecstatic, with their stake up 20% over the past week following NetApp, Inc.'s (NASDAQ:NTAP) latest third-quarter results. It looks like a credible result overall - although revenues of US$1.6b were in line with what the analysts predicted, NetApp surprised by delivering a statutory profit of US$1.48 per share, a notable 20% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for NetApp

After the latest results, the 17 analysts covering NetApp are now predicting revenues of US$6.51b in 2025. If met, this would reflect a credible 5.3% improvement in revenue compared to the last 12 months. Per-share earnings are expected to accumulate 7.7% to US$4.92. Before this earnings report, the analysts had been forecasting revenues of US$6.48b and earnings per share (EPS) of US$4.71 in 2025. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 9.3% to US$99.13. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic NetApp analyst has a price target of US$120 per share, while the most pessimistic values it at US$78.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting NetApp's growth to accelerate, with the forecast 4.2% annualised growth to the end of 2025 ranking favourably alongside historical growth of 2.1% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 4.7% annually. NetApp is expected to grow at about the same rate as its industry, so it's not clear that we can draw any conclusions from its growth relative to competitors.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around NetApp's earnings potential next year. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that in mind, we wouldn't be too quick to come to a conclusion on NetApp. Long-term earnings power is much more important than next year's profits. We have forecasts for NetApp going out to 2026, and you can see them free on our platform here.

You can also see our analysis of NetApp's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.