NetApp NTAP is expected to benefit from strength in Hybrid Cloud and Public Cloud segments and robust billings growth. The shift from traditional dedicated storage to shared storage in virtualized IT infrastructures is likely to act as a tailwind.
NetApp’s 2023 and 2024 earnings are expected to improve 3.4% and 11.2%, respectively, year over year. Revenues are anticipated to rise a respective 5.9% and 7% in 2023 and 2024.
NetApp reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.42 per share, which surpassed the Zacks Consensus Estimate by 11.8% and increased 21.4% year over year.
Revenues of $1.68 billion increased 8% year over year but missed the Zacks Consensus Estimate by 0.2%.
NetApp has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an earnings surprise of 12.57%, on average.
NetApp’s cash, cash equivalents and investments were $4.134 billion whereas long-term debt was $2.386 billion as of Apr 29, 2022. The net-cash balance allows the flexibility to pursue any growth strategy through acquisitions or otherwise.
NTAP stock is down 33% from its 52-week high level of $96.82 on Jan 1, 2022, making it more affordable for investors. The company’s shares are down 21.4% over a year compared with a 21.7% decline recorded by its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
Factors That Augur Well
NetApp provides enterprise storage, data management software and hardware products and services.
The company is gaining traction in the network-attached storage (NAS) market. Enterprises are shifting to NAS primarily due to its easy deployment capabilities and support for several networking environments.
NetApp has a broad portfolio of array-based flash solutions to capitalize on IT organizations. The increased preference for flash-based storage systems is due to cost effectiveness and faster reading and writing speeds.
The company’s partnerships with Alphabet’s Google Cloud platform and Amazon Web Services are expected to bolster the adoption of its Cloud Data Services and expand customer base.
A Few Headwinds
Wall Street has been facing extreme volatility due to various economic factors. The current interest rate hike by Federal Reserve coupled with the ongoing Russia-Ukraine war and pandemic-induced supply chain woes have made investors uncertain about the global economic recovery.
Apart from the ongoing supply chain issues, NetApp is likely to be adversely impacted by the loss of resellers as it is heavily dependent on sales through indirect channels, value-added resellers, systems integrators and distributors, etc.
Rising investments in product development and acquisitions to counter competition in the all-flash business and cloud-based storage domain are likely to hurt profitability.
Stocks to Consider
Some better-ranked stocks from the broader technology space are InterDigital IDCC, Vishay Intertechnology VSH and Avnet AVT. InterDigital and Avnet currently sport a Zacks Rank #1 (Strong Buy), whereas Vishay Intertechnology holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for InterDigital’s 2022 earnings is pegged at $3.33 per share, increasing 46.05% in the past 60 days. The long-term earnings growth rate is anticipated to be 15%.
InterDigital’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 141.13%. Shares of IDCC have declined 17.4% in the past year.
The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.
Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.96%. Shares of VSH have declined 20.2% in the past year.
The Zacks Consensus Estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, rising 20.5% in the past 60 days. The long-term earnings growth rate is anticipated to be 37.2%.
Avnet’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 21.22%. Shares of Avnet have grown 2.8% in the past year.