What’s next for NetApp stock, up 28% since early 2023?

NetApp

NTAP
A company that provides on-premises data storage systems and public cloud services is set to report its Q2 FY’24 results by the end of November. We expect the company’s revenue to be around $1.54 billion in the quarter, which is slightly above estimates, although it represents a decline of about 7% from last year. We estimate earnings to be around $1.40 per share, slightly above the consensus estimate. See our analysis netapp earnings preview For a closer look at what to expect when the company publishes earnings.

NetApp’s bread-and-butter hybrid cloud business is seeing some headwinds recently due to weak information technology spending and cost optimization by larger businesses. In Q1 FY’24, NetApp’s revenue declined 10% year-over-year to $1.43 billion, compared to $1.59 billion in Q1 2023, with adjusted earnings also declining marginally. While NetApp’s hybrid cloud segment saw a 12% decline in revenue, the company’s public cloud business is gaining momentum, with revenue growing nearly 17% last quarter. Although the business remains small, with sales of about $154 million or about 10% of total revenue, the segment remains important to the company given the industry’s push toward cloud-based storage.

Amid the current financial backdrop, NTAP stock has seen a 15% gain from the $65 level in early January 2021 to now around $75, compared to a nearly 20% gain for the S&P 500 over this nearly 3-year period. developed. However, the growth in NTAP stock has not been consistent. Returns for the stock were 39% in 2021, -35% in 2022, and 28% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 15% in 2023 – which suggests that NTAP underperforms S&P In 2022. In fact, Consistently beating the S&P 500 Individual stocks have had it tough in recent years – in good times and bad; To information technology giants including AAPL, MSFT, and NVDA, and even megacap stars GOOG, TSLA, and AMZN. In contrast, the Trefis High Quality Portfolio is a collection of 30 stocks. Outperformed the S&P 500 every year At the same time. Why so? As a group, HQ Portfolio stocks provided better returns with less risk than the benchmark index; Clearly less of a roller-coaster ride in HQ portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could NTAP face a similar situation as in 2022 and S&P’s performance is poor Over the next 12 months – or will we see a huge surge?

We believe NetApp has some upside from current levels. The company has taken steps to cut costs and increase profitability in the face of weak demand, with plans to reduce its workforce. NetApp is also strong in the traditional storage space, particularly in areas like all-flash arrays, and that could help the company as technologies like artificial intelligence continue to expand. Large AI language models require instant access and availability, making AFA a preferred storage solution. We also believe NetApp’s valuation is attractive, with the stock trading at around 12x FY24 consensus. We remain positive on NTAP stock with an $85 price estimate, which is approximately 10% ahead of the current market price. See our analysis netapp evaluation, Is NTAP Stock Expensive or Cheap? For more on what’s driving our price estimate for NetApp, read on.

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