NetApp's Robust Quarter Bugged by Guidance Glitch

In what appeared to be a positive fourth quarter earnings report by NetApp (NASDAQ: NTAP) unfortunately took a sharp turn when management's F1Q13 guidance left analysts scratching their heads. Research firms responded to the cloudy projection with a slew of price target drops and downgrades, but some still say hope is not lost for this seemingly irreparable stock.

NTAP began the conference call with cheers commending the company's solid fourth quarter performance, boasting revenue of $1.7 billion that contributed to full-year sales of $6.23 billion. The 22% total revenue growth announcement was just the beginning of several increased numbers, including a record of $5.4 billion in cash and investments.

Following news that likely solidified investor confidence, NTAP's Chief Financial Officer Nick Noviello dropped a bomb that overshadowed much of what was previously reported.

"Currently, the increasing uncertainty about the broader macroenvironment plays a prominent role [in guidance].This lack of clarity about the global economy limits our visibility at this time to accurately forecast our customer buying patterns going forward. For this reason, we are not planning to give full-year fiscal 2013 guidance now or at our upcoming Analyst Day," Noviello began, and from there the disappointing numbers began to flow.

Currently, NTAP's first quarter is set to bring in revenue ranging from $1.4 billion to $1.5 billion, implying a 15% sequential decline. Diluted share counts are also expected to decrease to 380 million shares.

According to Brean Murray Carret & Co., visibility has become so unclear on the stock that the firm chose to downgrade NTAP from Buy to Hold. The research firm has decided to wait for more direction concerning revenue in coming quarters and what valuation investors will pay if sales end up being flattish; and they're not the only ones.

J.P. Morgan, Cantor Fitzgerald, Goldman Sachs and Piper Jaffray are just a few of the major research firms that chose to lower price targets on NTAP's stock today, mainly citing guidance as the reason for the drops. However, some say the fuzzy guidance has only opened up an attractive entry point to purchase the wavering stock.

FBN Securities has upgraded NTAP on the basis that the company had net cash of roughly $11 per share following after-hours trading yesterday. Also, the idea that shares could stay around $28-$29 prompts the feeling that NTAP could potentially become an attractive target for larger businesses looking to merge or acquire the storage and data management solutions provider.

NTAP certainly has a few numbers to crunch over the next few weeks as time has been bought up to its June 26th Analyst Day. Antsy investors and research firms sitting on the sidelines are curious to know where the stock is headed next, and without management leading the way confidence will continue to deplete.

So where will these battered and bruised egos land? Possibly in the hands of NTAP competitor EMC Corporation (NYSE: EMC), which just displayed 42 new products at its highly attended investor program. The innovative company touted a high-end refurbish of the VMAX line, along with software enhancements across the board.

According to Goldman Sachs, there is much to look forward to with EMC's clear-cut path.

"The topics of discussion varied widely, and our top five takeaways are as follows: 1) new VMAX should quickly repair last quarter's high-end slip; 2) Isilon could turn up the heat on NetApp with OneFS (Mavericks); 3) EMC is attempting to envelop point flash products with heavy integration; 4) flash everywhere, but disks will remain; and 5) EMC is proving the cloud is not just for startups," the research firm noted on Tuesday.

Now there's a stock on a mission to impress.

NTAP is currently trading at $28.25, down 45.11% year-over-year, while EMC is trading at $24.06, down 12.15% year-over-year.