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Here's Why You Should Invest in NetApp (NTAP) Stock Now

Zacks Equity Research
Updated

Shares of NetApp Inc. NTAP have been on a steady rise since the company announced its second-quarter 2018 results. Strong fundamentals and positive estimate revisions hint at a bullish momentum. Therefore, if you have overlooked the company’s recent price appreciation then this is the right time to add the stock to your portfolio.

This Zacks Rank #1 (Strong Buy) company has a long-term expected EPS growth rate of 11.3% and has great prospects of carrying the momentum in the near term.

Share Price Appreciation

Shares of NetApp have gained approximately 62.4% year to date, significantly outperforming its industry’s gain of 25.6%.

Positive Earnings Surprise History

NetApp outpaced the Zacks Consensus Estimate in the trailing four quarters, recording an encouraging positive average earnings surprise of 11.5%.

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Upward Estimate Revisions

In the last 60 days, the Zacks Consensus Estimate for NetApp’s third-quarter and Fiscal 2018 have witnessed upward revisions. For the third quarter, the Zacks Consensus Estimates for earnings has gone up by 6 cents in the last 60 days and is currently pegged at 90 cents. The Zacks Consensus Estimate for fiscal 2018 also moved north by 21 cents to $3.31 per share, over the same time frame.

Earnings

NetApp announced stellar second-quarter 2018 results on Nov 15, 2017. The company reported non-GAAP earnings of 81 cents per share, beating the Zacks Consensus Estimate of 69 cents. The figure increased by 35% year over year and was also within the guided range. Revenues of 1.42 billion also increased 6% year over year also surpassing the Zacks Consensus Estimate of $1.38 billion.

The impressive second-quarter results were driven by the company’s successful ongoing transition from underperforming segments to growth oriented sectors like all-flash arrays and hybrid cloud and Data Fabric strategies.

NetApp, Inc. Revenue (TTM)

NetApp, Inc. Revenue (TTM) | NetApp, Inc. Quote

Additionally, the company has a positive outlook toward the phenomenal rate of data growth since its cloud-integrated all-flash solution fits well with the hybrid cloud infrastructure.

NetApp has been witnessing higher demand for its flash-based solutions which have been a major contributor toward the company’s revenue growth. Moreover, the acquisition of SolidFire has further enhanced NetApp’s position in the all-flash array market.

Positive Outlook

For third-quarter fiscal 2018, NetApp expects non-GAAP earnings per share in the range of 86-94 cents. The Zacks Consensus Estimate for the current quarter was pegged at 84 cents.

Net revenues are anticipated to be in the range of $1.43-$1.58 billion, which at the mid-point implies 6.8% growth from the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.43 billion.

Other Driving Factors

The company’s expertise in the flash array market is increasing its prominence in the storage area network (SAN) and converged infrastructure markets. The company’s newly launched hyper-converged infrastructure is also expected to be a positive for the top line in the long run.

We believe NetApp is well positioned to enjoy steady growth with its diversified portfolio and strong distribution channels that will drive demand for the products going forward.

NetApp’s decision to realign its business and invest in strategic initiatives will enable the company to ease the pricing pressure and soft sales due to lower demand from U.S. federal agencies.

Moreover, the company has a consistent record of returning cash through share repurchase and dividend payouts. It returned $900 million during fiscal 2017. NetApp’s strong cash generating abilities and a healthy balance sheet allows it to take shareholder-friendly decisions.

NetApp recently announced new additions to its board of directors who will ‘strengthen’ the company’s boards and deliver value to the shareholders.

Other Stocks to Consider

A few other stocks worth consideration from the broader technology sector are Broadcom Limited AVGO, NVIDIA Corporation NVDA and Western Digital Corporation WDC. All the three stocks sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom, NVIDIA and Western Digital have a long-term expected EPS growth rate of 13.7%, 10.25% and 31.12%, respectively.

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Western Digital Corporation (WDC) : Free Stock Analysis Report
 
NetApp, Inc. (NTAP) : Free Stock Analysis Report
 
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
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