Sector Wrap: Data storage stocks mostly decline

Shares of data storage products makers traded mostly lower Thursday, with shares of 3Par Inc. and Compellent Technologies Inc. falling after an analyst began coverage of both stocks with "Market Perform" ratings.

Shares of Fremont, Calif.-based network storage company 3Par Inc. fell 42 cents, or 5.4 percent, to finish an abbreviated trading session at $7.38. Eden Prairie, Minn.-based Compellent fell 30 cents, or 2.7 percent, to $10.66.

Friedman Billings Ramsey & Co. analyst Clay Sumner initiated coverage of 3Par with a $9 price target and Compellent with a $10 price target.

The analyst said 3Par is "fairly valued" and Compellent's shares are "fully valued."

He believes that since the companies are new they are still growing rapidly, and they are not yet operating at their target margins.

In a note to clients, he wrote that at least for the short term, the stocks "will react more to revenue growth outperformance or underperformance than to views about out-year margins."

Meanwhile, shares of Sunnyvale, Calif.-based NetApp Inc. fell 5 cents to finish at $21.94.

Merriman Curhan Ford analyst Alex Kurtz began coverage of NetApp with a "Neutral" rating on Thursday, saying the storage and data management company's competition is growing at a time when it is trying to increase growth in global enterprise accounts.

"We believe both of these issues present near and long-term challenges to NetApp, and as a result, we remain cautious on the shares as the company seeks to reaccelerate top-line growth in a challenging economic environment in North America (55 percent of sales) with enterprise customers," Kurtz said.

A company spokesperson could not immediately be reached for comment.