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NetApp (NTAP) Hits 52-Week High: What's Behind the Rally?

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Shares of NetApp, Inc. (NTAP - Free Report) rallied to a 52-week high of $60.66 on Jan 10, eventually closing marginally lower at $60.65. The stock has been witnessing momentum and positive revision estimates since the company announced impressive fiscal second-quarter 2018 results.

The company has been gaining from its all flash array products, gaining traction in the storage and hybrid cloud market as well as consistent record of returning cash to investors.

Notably, the stock has returned 69.4% in the last year, outperforming the industry’s rally of 28.7%. The stock has a market cap of $15.31 billion.

What’s Driving the Stock?

NetApp is a prominent provider of enterprise storage and data management software and hardware products. The company is gaining significantly from the transition to shared storage in virtualized IT infrastructures. NetApp has been witnessing higher demand for its flash-based solutions, which have been a major contributor to the company’s revenues.

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

Its expanded partnership with Microsoft (MSFT - Free Report) Azure for the development of the industry’s first cloud-based enterprise Network File System (NFS) to be delivered via Azure is also a positive.

The acquisition of SolidFire has strengthened NetApp’s position in the all-flash array market by adding new flash offerings. SolidFire’s flash arrays are built on Next Generation Data Centers that simplify data center operations and enable rapid deployments of new applications. NetApp has a dominant position in the flash storage market. The acquisition is expected to boost NetApp’s flash based storage product portfolio going forward.

Upbeat Q2

The company reported fiscal second-quarter 2018 non-GAAP earnings of 81 cents per share, beating the Zacks Consensus Estimate of 69 cents per share. The figure surged 35% on a year-over-year basis and was also within the guided range.

Revenues of $1.42 billion increased 6% from the year-ago quarter, surpassing the Zacks Consensus Estimate of $1.38 billion. The figure met management’s expectation.

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.

Encouraging Earnings Surprise History & Estimate Revisions

This Zacks Rank #1 (Strong Buy) stock has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive earnings surprise of 11.45%.

Further, the company has a long-term expected EPS growth rate of 11.34%.

Over the last 60 days, fiscal 2018 estimates were revised upward, taking the Zacks Consensus Estimate up from $3.10 to $3.33 per share.

Key Picks

Other stocks in the broader technology sector are Broadcom Limited (AVGO - Free Report) and NVIDIA Corporation (NVDA - Free Report) , sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Broadcom and NVIDIA have a long-term expected EPS growth rate of 13.75% and 10.25%, respectively.

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