Bank of America’s latest survey among NetApp (NTAP) Value-Added Resellers (VARs) reveals a stable demand in the information technology hardware sector.
The bank stated that half of the NTAP VARs reported sales consistent with their estimates for the first quarter of 2024, but the overall sentiment turned slightly more pessimistic with a weighted score of negative 0.3, down from the previous quarter’s positive 0.8.
According to the report, expectations regarding storage demand have slightly decreased: “The percentage of respondents indicating the storage order pipeline includes both long-term and short-term deals declined to 30% (down from 35% in the fourth quarter of the previous year), and the percentage of those unsure if storage demand will continue throughout the 2024 calendar year increased to 70% (up 5% from the previous quarter).”
The frequency of price discounts has increased; 60% of respondents to the survey indicated that there would be an increase in price discounts in the first quarter of 2024; this figure was 35% in the previous quarter. Bank of America notes, “Price discounts in distribution channels are becoming more frequent at times as a strategy to gain market share, particularly when direct sales perform more strongly.”
While the order rate for the first quarter of 2024 varied, it showed no change on average compared to the previous quarter. According to the survey, “April orders declined compared to March, with VARs observing an average decrease of 0.3%.” Delivery times remained relatively unchanged.
NTAP experienced a marginal increase in flash storage adoption. Bank of America states, “20.5% of the survey participants’ customers are currently using All-Flash FAS or NetApp’s EF/E series to meet their flash storage requirements, which represents a small increase from the previous survey’s 19%.” NetApp’s share in the flash storage market rose to 25%, with Pure and Dell emerging as leading competitors.
In summary, the survey highlights the overall stability in demand for IT hardware. While the bank acknowledges that profit margins have proven more resilient than expected, it continues to assign an Underperform rating to NTAP due to potential risks related to broader economic factors and company performance in financial forecasts.
Source: investing.com
