What happened
Shares of NetApp (NTAP +1.15%) shed 17.8% of their value in August, according to data from S&P Global Market Intelligence. The stock tumbled after the enterprise data services company cut its first-quarter sales and profit outlook and lowered its full-year sales growth guidance. Management cited macroeconomic factors (including the trade standoff between the U.S. and China) as contributing to reduced customer demand.
NetApp published preliminary first-quarter results on Aug. 1, and the company reported that sales for the period were likely to come in between $1.22 and $1.23 billion -- down significantly from initial guidance for revenue between $1.315 billion to $1.465 billion. Management also slashed the target on non-GAAP (adjusted) earnings per share to between $0.55 and $0.60 -- down from the previous guidance for earnings per share between $0.78 and $0.86.
Image source: Getty Images.
So what
While the company had stated in May that it expected sales for the year to grow at the low end of the mid-single-digit range, NetApp's preliminary first-quarter results arrived with news that annual revenue is poised to fall between 5% and 10%.
By the time that NetApp actually reported its first-quarter results on Aug. 14, expectations had been lowered and the stock posted little movement. Revenue for the period came in at $1.24 billion, down 15.6% year over year. Non-GAAP (adjusted) earnings per share for the quarter came in at $0.65, significantly ahead of the average analyst estimate -- but also down 37.5% from adjusted earnings of $1.04 in the prior-year period.
Now what
NetApp stock has regained some ground in September. The company's share price is up 13.4% in the month's trading so far, and appears to have benefited from executive vice president and chief financial officer Ron Pasek's presentation at the Citi Global Technology Conference on Sept. 5.
NetApp management reports that the company is still seeing strong customer enthusiasm for the business's hybrid-cloud data services. Pasek outlined some of the macroeconomic headwinds the business is facing and highlighted growth opportunities for the company in on-premise flash storage, private cloud, and cloud data services.
NetApp stock trades at roughly 13 times this year's expected earnings and has a dividend yield of 3%.
