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NetApp (NTAP) Up 65% in the Past Year: Will the Rally Last?
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NetApp (NTAP - Free Report) is continuing its upward trajectory, with a gain of 64.8% in the past year compared with the S&P 500 composite’s 30.3% growth.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, NTAP has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 (Buy) and a VGM Score of A or B offer solid investment opportunities.
Image Source: Zacks Investment Research
The stock is down 9.2% from its 52-week high level of $112.48, making it relatively affordable for investors.
NTAP’s fiscal 2025 revenues are anticipated to rise 4% year over year to $6.5 billion. The company’s earnings per share (EPS) are expected to climb 15% and 2.9% on a year-over-year basis to $6.43 and $6.62 in fiscal 2024 and 2025, respectively.
The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has increased 4.4% and 3.6%, respectively, in the past 60 days, reflecting analysts’ optimism.
The long-term earnings growth rate is 8.8%. NTAP beat estimates in each of the last four quarters, delivering an average earnings surprise of 12.3%.
NetApp’s PE ratio is pegged at 16.04, lower than the industry’s ratio of 27.3.
Growth Catalysts
Management expects momentum in all-flash products, and hyper-scaler first-party and marketplace services to drive revenues.
The company is gaining from data-driven digital and cloud transformations involving business analytics, artificial intelligence, data security and application modernization.
Frequent product launches, extensive cost discipline, strengthening go-to-market activities and various cloud collaborations remain major positives.
The company recently reported third-quarter fiscal 2024 non-GAAP earnings of $1.94 per share, which surpassed the Zacks Consensus Estimate by 14.8% and increased 41.6% year over year.
Management anticipated non-GAAP EPS in the range of $1.64-$1.74 for the same time frame.
Revenues of $1.61 billion increased 5.2% year over year. NTAP projected revenues in the $1.51-$1.67 billion range. The uptick was caused by solid demand across the latest all-flash products. Also, revenues beat the consensus mark by 0.9%.
Extensive cost discipline aided margin performance. Non-GAAP gross margin of 72.7% expanded 590 basis points (bps) from the prior-year levels. Non-GAAP operating margin expanded 580 bps to 30.2%.
Raised Outlook
NetApp now expects fiscal 2024 revenues in the band of $6.185-$6.335 billion.
The company expects non-GAAP EPS in the range of $6.40-$6.50 (previous prediction: $6.05-$6.25) for fiscal 2024.
For fiscal 2024, NetApp expects non-GAAP gross margin to be 71-72% compared with 71% anticipated earlier. Non-GAAP operating margin is projected to be nearly 27% compared with 26% projected earlier.
Healthy Capital Allocation Strategy
NetApp exited the quarter ending Jan 26, 2023, with $2.917 billion in cash, cash equivalents and investments compared with $2.620 billion as of Oct 27. Long-term debt was $1.991 billion, which remained unchanged as of Oct 27. Net cash from operations was $484 million compared with $377 million in the previous quarter. Free cash flow was $448 million (free cash flow margin of 27.9%) compared with $319 million in the prior-year quarter (20.9%).
A strong balance sheet helps NetApp to continue shareholder-friendly initiatives of dividend payouts. In third-quarter fiscal 2024, it returned $203 million to shareholders as dividend payouts and share repurchases. It has $1 billion worth of shares remaining under its existing authorization. For fiscal 2023, the company had returned $1.28 billion to shareholders in the form of dividends and share repurchases.
A Few Headwinds
However, uncertainty prevailing over macroeconomic conditions and high interest rates continues to weigh on the company’s performance. Also, price increases on NAND from suppliers are likely to affect 2024 product gross margins. Stiff competition is a concern.
The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 3.6% in the past 60 days to $3.76. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.6%. Shares of MANH have surged 74.5% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2024 EPS has remained unchanged at $17.89 in the past 60 days. The long-term earnings growth rate is 13%. Shares of ADBE have soared 61.5% in the past year.
The Zacks Consensus Estimate for Microsoft’s fiscal 2024 EPS is pegged at $11.63, indicating growth of 18.6% from the year-ago levels. Microsoft’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.8%. The long-term earnings growth rate is 16.2%. Shares of MSFT have rallied 54.4% in the past year.
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NetApp (NTAP) Up 65% in the Past Year: Will the Rally Last?
NetApp (NTAP - Free Report) is continuing its upward trajectory, with a gain of 64.8% in the past year compared with the S&P 500 composite’s 30.3% growth.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment.
Apart from a favorable rank, NTAP has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 (Buy) and a VGM Score of A or B offer solid investment opportunities.
Image Source: Zacks Investment Research
The stock is down 9.2% from its 52-week high level of $112.48, making it relatively affordable for investors.
NTAP’s fiscal 2025 revenues are anticipated to rise 4% year over year to $6.5 billion. The company’s earnings per share (EPS) are expected to climb 15% and 2.9% on a year-over-year basis to $6.43 and $6.62 in fiscal 2024 and 2025, respectively.
The Zacks Consensus Estimate for fiscal 2024 and 2025 earnings has increased 4.4% and 3.6%, respectively, in the past 60 days, reflecting analysts’ optimism.
The long-term earnings growth rate is 8.8%. NTAP beat estimates in each of the last four quarters, delivering an average earnings surprise of 12.3%.
NetApp’s PE ratio is pegged at 16.04, lower than the industry’s ratio of 27.3.
Growth Catalysts
Management expects momentum in all-flash products, and hyper-scaler first-party and marketplace services to drive revenues.
The company is gaining from data-driven digital and cloud transformations involving business analytics, artificial intelligence, data security and application modernization.
Frequent product launches, extensive cost discipline, strengthening go-to-market activities and various cloud collaborations remain major positives.
The company recently reported third-quarter fiscal 2024 non-GAAP earnings of $1.94 per share, which surpassed the Zacks Consensus Estimate by 14.8% and increased 41.6% year over year.
Management anticipated non-GAAP EPS in the range of $1.64-$1.74 for the same time frame.
Revenues of $1.61 billion increased 5.2% year over year. NTAP projected revenues in the $1.51-$1.67 billion range. The uptick was caused by solid demand across the latest all-flash products. Also, revenues beat the consensus mark by 0.9%.
Extensive cost discipline aided margin performance. Non-GAAP gross margin of 72.7% expanded 590 basis points (bps) from the prior-year levels. Non-GAAP operating margin expanded 580 bps to 30.2%.
Raised Outlook
NetApp now expects fiscal 2024 revenues in the band of $6.185-$6.335 billion.
The company expects non-GAAP EPS in the range of $6.40-$6.50 (previous prediction: $6.05-$6.25) for fiscal 2024.
For fiscal 2024, NetApp expects non-GAAP gross margin to be 71-72% compared with 71% anticipated earlier. Non-GAAP operating margin is projected to be nearly 27% compared with 26% projected earlier.
Healthy Capital Allocation Strategy
NetApp exited the quarter ending Jan 26, 2023, with $2.917 billion in cash, cash equivalents and investments compared with $2.620 billion as of Oct 27. Long-term debt was $1.991 billion, which remained unchanged as of Oct 27. Net cash from operations was $484 million compared with $377 million in the previous quarter. Free cash flow was $448 million (free cash flow margin of 27.9%) compared with $319 million in the prior-year quarter (20.9%).
A strong balance sheet helps NetApp to continue shareholder-friendly initiatives of dividend payouts. In third-quarter fiscal 2024, it returned $203 million to shareholders as dividend payouts and share repurchases. It has $1 billion worth of shares remaining under its existing authorization. For fiscal 2023, the company had returned $1.28 billion to shareholders in the form of dividends and share repurchases.
A Few Headwinds
However, uncertainty prevailing over macroeconomic conditions and high interest rates continues to weigh on the company’s performance. Also, price increases on NAND from suppliers are likely to affect 2024 product gross margins. Stiff competition is a concern.
Other Stocks to Consider
Some other top-ranked stocks worth consideration in the broader technology space are Manhattan Associates (MANH - Free Report) , Adobe (ADBE - Free Report) and Microsoft (MSFT - Free Report) . While Manhattan Associates sports a Zacks Rank #1, Adobe and Microsoft carry a Zacks Rank of 2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MANH’s 2024 EPS has increased 3.6% in the past 60 days to $3.76. Manhattan Associates’ earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 27.6%. Shares of MANH have surged 74.5% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2024 EPS has remained unchanged at $17.89 in the past 60 days. The long-term earnings growth rate is 13%. Shares of ADBE have soared 61.5% in the past year.
The Zacks Consensus Estimate for Microsoft’s fiscal 2024 EPS is pegged at $11.63, indicating growth of 18.6% from the year-ago levels. Microsoft’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 8.8%. The long-term earnings growth rate is 16.2%. Shares of MSFT have rallied 54.4% in the past year.