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NTAP or PSTG: Which Flash Memory Stock is a Top Pick?
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Investors acquainted with flash memory stocks are likely to be familiar with names like Micron Technology (MU - Free Report) , Intel (INTC - Free Report) , NetApp (NTAP - Free Report) and Pure Storage (PSTG - Free Report) . Among these, the last two stocks hold a dominant position in the flash memory market.
But which of these two stocks offer higher returns for investors right now? Or have the potential to exceed expectations in the future? Let’s delve deeper and analyze these two stocks.
The flash memory market is a flourishing part of the technology space and has been gaining traction in the recent years driven by expanding storage needs and various options to address those needs. Since the market is dominated by a few large players, it makes sense to weigh the pros and cons before investing.
In this article, we will provide a brief industry background before diving into the details.
Digging Into the Details
Flash memory is a non-volatile, electronic computer storage medium that can be re-programmed. It is used in solid state drives (SSDs), computer random access memory (RAM), universal serial bus (USB) drives, hybrid drives, digital camera, handsets, memory cards graphics cards and pagers.
The increasing use of flash memory in cell phones which now boast of higher memory capacity is the primary driving force of its worldwide market. The exponential growth of data, complexity of data formats and the need to scale resources at regular intervals has compelled several companies to turn to flash memory vendors.
In fact, there has been a radical change in the way people are using devices and interacting with each other, leading to an increased adoption of mobile devices. Consequently, demand for flash storage has shot up.
Flash Memory Market Trends to Watch
Per Statista, the flash memory market is expected to be worth $27.6 billion globally in 2020.
IDC forecasts that by 2025, the global datasphere will grow to 163 zettabytes (that is a trillion gigabytes), which is 10 times the 16.1 zettabytes (ZB) of data generated in 2016. Due to the high performance and low latency features of flash storage, it has become the ideal storage technology to harness this data explosion.
Moreover, per IDC, revenues from Big Data and business analytics applications is expected to grow at a compound annual growth rate (CAGR) of 11.9% to reach $260 million in 2022. Currently, it is valued at $166 billion, up 11.7% over 2017.
Another research firm, Research and Markets projects worldwide data center storage market to grow at a four-year CAGR of 11.83% during the period 2018-2022.
NetApp Looks Good
NetApp, a Zacks Rank #1 (Strong Buy) stock, remains one of the best performers in the flash memory devices space. The company has outperformed the industry over the past year. Shares of NetApp have soared 115.4% compared with the industry’s growth of 18.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, NetApp has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 15.3%. Over the past several quarters, the company has been witnessing significant top and bottom-line growth on a year-over-year basis primarily driven by strong product adoption, increasing deal wins, and expanding customer base across varied geographies.
Moreover, the company’s transition to data fabric strategy (a software-defined approach to data management) is expanding business opportunities. Further, the company increased momentum of its HCI and expanded new cloud partnerships, which contributed to overall revenue growth.
The EPS estimate for the current fiscal year has been revised upward to $4.42 from $4.04 per share over the last 60 days. The stock has Growth Style Score of A and a long-term expected EPS growth rate of 14.1%. The company has a market cap of $22.79 billion.
Moreover, combined with other attractive features like high return on equity (ROE) and high return on capital (ROC), the stock looks very attractive. NetApp currently trades at a ROE of 47.6%, higher than the industry average of 43.5%. Notably, the company has an ROC of 24.7% compared with the industry average of 20.5%.
The stock has been in the limelight on the back of striking performances driven by solid earnings results and strong growth projections. Keeping this in mind, we believe investing in this stock will yield strong returns for your portfolio in the short term.
Pure Storage Falling Behind
Pure Storage, meanwhile, has a Zacks Rank #3 (Hold) and surged 84.7% over the last one year much better than the industry’s growth of 18.5%.
Pure Storage has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 78.5%.
The EPS estimate for the current fiscal year has been revised upward to 21 cents per share from 14 cents per share over the last 60 days.
The stock has Growth Style Score of A and a long-term expected growth rate of 17.5%. The company has a market cap of $6.37 billion, much lower than its closest rival NetApp.
Moreover, combined with other unfavorable factors like low ROE and low ROC, the stock looks very unattractive. Pure Storage currently trades at a ROE of 2.9%, lower than the industry average of 43.5%. Moreover, its ROC looks very dull. It currently trades at a negative ROC of 24.4%, compared with an average positive industry average of 20.5%.
Given the unfavorable factors and Zacks Rank #3, we think the shares might be at a risk. Moreover, intensifying competition, lack of international customers, mounting losses and stretched valuations are concerns.
Conclusion
Given the current scenario, we would bet on NetApp because it is well-positioned to outpace the industry and is fundamentally strong to withstand risks compared with Pure Storage.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
NTAP or PSTG: Which Flash Memory Stock is a Top Pick?
Investors acquainted with flash memory stocks are likely to be familiar with names like Micron Technology (MU - Free Report) , Intel (INTC - Free Report) , NetApp (NTAP - Free Report) and Pure Storage (PSTG - Free Report) . Among these, the last two stocks hold a dominant position in the flash memory market.
But which of these two stocks offer higher returns for investors right now? Or have the potential to exceed expectations in the future? Let’s delve deeper and analyze these two stocks.
The flash memory market is a flourishing part of the technology space and has been gaining traction in the recent years driven by expanding storage needs and various options to address those needs. Since the market is dominated by a few large players, it makes sense to weigh the pros and cons before investing.
In this article, we will provide a brief industry background before diving into the details.
Digging Into the Details
Flash memory is a non-volatile, electronic computer storage medium that can be re-programmed. It is used in solid state drives (SSDs), computer random access memory (RAM), universal serial bus (USB) drives, hybrid drives, digital camera, handsets, memory cards graphics cards and pagers.
The increasing use of flash memory in cell phones which now boast of higher memory capacity is the primary driving force of its worldwide market. The exponential growth of data, complexity of data formats and the need to scale resources at regular intervals has compelled several companies to turn to flash memory vendors.
In fact, there has been a radical change in the way people are using devices and interacting with each other, leading to an increased adoption of mobile devices. Consequently, demand for flash storage has shot up.
Flash Memory Market Trends to Watch
Per Statista, the flash memory market is expected to be worth $27.6 billion globally in 2020.
IDC forecasts that by 2025, the global datasphere will grow to 163 zettabytes (that is a trillion gigabytes), which is 10 times the 16.1 zettabytes (ZB) of data generated in 2016. Due to the high performance and low latency features of flash storage, it has become the ideal storage technology to harness this data explosion.
Moreover, per IDC, revenues from Big Data and business analytics applications is expected to grow at a compound annual growth rate (CAGR) of 11.9% to reach $260 million in 2022. Currently, it is valued at $166 billion, up 11.7% over 2017.
Another research firm, Research and Markets projects worldwide data center storage market to grow at a four-year CAGR of 11.83% during the period 2018-2022.
NetApp Looks Good
NetApp, a Zacks Rank #1 (Strong Buy) stock, remains one of the best performers in the flash memory devices space. The company has outperformed the industry over the past year. Shares of NetApp have soared 115.4% compared with the industry’s growth of 18.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, NetApp has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 15.3%. Over the past several quarters, the company has been witnessing significant top and bottom-line growth on a year-over-year basis primarily driven by strong product adoption, increasing deal wins, and expanding customer base across varied geographies.
Moreover, the company’s transition to data fabric strategy (a software-defined approach to data management) is expanding business opportunities. Further, the company increased momentum of its HCI and expanded new cloud partnerships, which contributed to overall revenue growth.
The EPS estimate for the current fiscal year has been revised upward to $4.42 from $4.04 per share over the last 60 days. The stock has Growth Style Score of A and a long-term expected EPS growth rate of 14.1%. The company has a market cap of $22.79 billion.
Moreover, combined with other attractive features like high return on equity (ROE) and high return on capital (ROC), the stock looks very attractive. NetApp currently trades at a ROE of 47.6%, higher than the industry average of 43.5%. Notably, the company has an ROC of 24.7% compared with the industry average of 20.5%.
The stock has been in the limelight on the back of striking performances driven by solid earnings results and strong growth projections. Keeping this in mind, we believe investing in this stock will yield strong returns for your portfolio in the short term.
Pure Storage Falling Behind
Pure Storage, meanwhile, has a Zacks Rank #3 (Hold) and surged 84.7% over the last one year much better than the industry’s growth of 18.5%.
Pure Storage has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 78.5%.
The EPS estimate for the current fiscal year has been revised upward to 21 cents per share from 14 cents per share over the last 60 days.
The stock has Growth Style Score of A and a long-term expected growth rate of 17.5%. The company has a market cap of $6.37 billion, much lower than its closest rival NetApp.
Moreover, combined with other unfavorable factors like low ROE and low ROC, the stock looks very unattractive. Pure Storage currently trades at a ROE of 2.9%, lower than the industry average of 43.5%. Moreover, its ROC looks very dull. It currently trades at a negative ROC of 24.4%, compared with an average positive industry average of 20.5%.
Given the unfavorable factors and Zacks Rank #3, we think the shares might be at a risk. Moreover, intensifying competition, lack of international customers, mounting losses and stretched valuations are concerns.
Conclusion
Given the current scenario, we would bet on NetApp because it is well-positioned to outpace the industry and is fundamentally strong to withstand risks compared with Pure Storage.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>