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NetApp Stock Surges 34% Year to Date: Will the Rally Continue?
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NetApp’s (NTAP - Free Report) shares have been performing well on the trading front, with a gain of 33.7% year to date compared with the sub-industry and the S&P 500 composite’s growth of 33.4% and 18.1%, respectively.
Strong financial performance is driving the stock’s trajectory. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 8.6%.
Closing at $117.86 as of yesterday’s trading session, NTAP stock is currently trading 12.7% below its 52-week high of $135.01 attained on July 10, 2024. This reflects further upside potential. Increasing demand across the all-flash and cloud storage portfolio is emerging as a tailwind for NetApp’s top line.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
What is Driving NTAP’s Performance?
NetApp is witnessing higher demand from customers for its portfolio of modern all-flash arrays, especially the C-series capacity flash and ASA block-optimized flash. The new all-flash A-series is also picking up momentum. These enterprise storage products will allow users to boost workloads, including traditional enterprise applications and Gen AI. The company expects the new AFF A-series, along with its C-series and ASA products, to capture further share in the all-flash market.
Also, Keystone’s storage-as-a-service offering is gaining significant traction, with revenues increasing more than 60% year over year in fiscal first-quarter 2025. The company’s All-Flash Array Business’s annualized net revenue run rate was $3.4 billion, up 21% year over year in the same quarter. Total billings rose 12% year over year to $1.45 billion.
Strengthening demand for NetApp’s solutions in flash, block, cloud storage and AI bodes well. In the fiscal first quarter, the company won more than 50 AI and data lake modernization deals. NTAP now expects full-year revenues in the range of $6.48-$6.68 billion, up 5% year over year at the mid-point. Earlier it projected sales in the band of $6.45-$6.65 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7 and $7.2, up 10% year over year at the mid-point. Earlier, it projected non-GAAP earnings between $6.8 and $7 per share. For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is projected in the band of 27-28%, unchanged from the prior view.
However, the uncertain macroeconomic environment and cautious IT spending amid stiff competition in the all-flash business remain concerning.
NTAP’s Healthy Capital Allocation Strategy
NetApp’s cash, cash equivalents and investments were $3.02 billion and long-term debt was $1.244 billion as of July 26, 2024. For the fiscal first quarter, the company generated net cash from operations was $341 million and free cash flow was $300 million (free cash flow margin of 19.5%). Net cash balance provides the required flexibility to pursue any growth strategy, whether through acquisitions or otherwise.
A strong balance sheet helps NetApp to continue its shareholder-friendly initiatives of dividend payouts. The company returned $507 million to its shareholders as dividend payouts and share repurchases in the fiscal first quarter. NTAP has $1 billion worth of shares remaining under its existing authorization.
NTAP also announced a dividend of 52 cents payable on Oct. 23 to shareholders of record as of the close of business on Oct. 4.
Impressive Estimates Activity
The Zacks Consensus Estimate for NTAP’s fiscal 2025 and 2026 revenues is pegged at $6.57 billion and $6.85 billion, respectively, which indicates year-over-year growth of 4.9% and 4.2%.
The Zacks Consensus Estimate for earnings per share for fiscal 2025 and 2026 is pegged at $7.03 and $7.49, respectively, which implies a rise of 8.8% and 6.4% year over year.
The Zacks Consensus Estimate for fiscal 2025 and 2026 EPS has increased 2.5% and 2%, respectively, in the past 60 days, reflecting analysts’ optimism.
NTAP’s Favorable Rank & Growth Score
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at present.
Apart from a favorable rank, NTAP has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
The Zacks Consensus Estimate for MANH’s 2024 EPS is pegged at $4.26, unchanged in the past 30 days. MANH’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 26.6%. The stock has surged 33.9% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2024 EPS is pegged at $18.18, increased 2 cents in the past 30 days. ADBE’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 2.6%. The long-term earnings growth rate is 13.1%. Its shares have declined 2% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.96, unchanged in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once, with the average surprise being 4.8%. Its shares have gained 2% in the past year
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NetApp Stock Surges 34% Year to Date: Will the Rally Continue?
NetApp’s (NTAP - Free Report) shares have been performing well on the trading front, with a gain of 33.7% year to date compared with the sub-industry and the S&P 500 composite’s growth of 33.4% and 18.1%, respectively.
Strong financial performance is driving the stock’s trajectory. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters with an average surprise of 8.6%.
Closing at $117.86 as of yesterday’s trading session, NTAP stock is currently trading 12.7% below its 52-week high of $135.01 attained on July 10, 2024. This reflects further upside potential. Increasing demand across the all-flash and cloud storage portfolio is emerging as a tailwind for NetApp’s top line.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
What is Driving NTAP’s Performance?
NetApp is witnessing higher demand from customers for its portfolio of modern all-flash arrays, especially the C-series capacity flash and ASA block-optimized flash. The new all-flash A-series is also picking up momentum. These enterprise storage products will allow users to boost workloads, including traditional enterprise applications and Gen AI. The company expects the new AFF A-series, along with its C-series and ASA products, to capture further share in the all-flash market.
Also, Keystone’s storage-as-a-service offering is gaining significant traction, with revenues increasing more than 60% year over year in fiscal first-quarter 2025. The company’s All-Flash Array Business’s annualized net revenue run rate was $3.4 billion, up 21% year over year in the same quarter. Total billings rose 12% year over year to $1.45 billion.
Strengthening demand for NetApp’s solutions in flash, block, cloud storage and AI bodes well. In the fiscal first quarter, the company won more than 50 AI and data lake modernization deals. NTAP now expects full-year revenues in the range of $6.48-$6.68 billion, up 5% year over year at the mid-point. Earlier it projected sales in the band of $6.45-$6.65 billion.
The company now forecasts non-GAAP earnings per share for fiscal 2025 to be between $7 and $7.2, up 10% year over year at the mid-point. Earlier, it projected non-GAAP earnings between $6.8 and $7 per share. For fiscal 2025, NetApp continues to expect non-GAAP gross margin in the range of 71-72%. Non-GAAP operating margin is projected in the band of 27-28%, unchanged from the prior view.
However, the uncertain macroeconomic environment and cautious IT spending amid stiff competition in the all-flash business remain concerning.
NTAP’s Healthy Capital Allocation Strategy
NetApp’s cash, cash equivalents and investments were $3.02 billion and long-term debt was $1.244 billion as of July 26, 2024. For the fiscal first quarter, the company generated net cash from operations was $341 million and free cash flow was $300 million (free cash flow margin of 19.5%). Net cash balance provides the required flexibility to pursue any growth strategy, whether through acquisitions or otherwise.
A strong balance sheet helps NetApp to continue its shareholder-friendly initiatives of dividend payouts. The company returned $507 million to its shareholders as dividend payouts and share repurchases in the fiscal first quarter. NTAP has $1 billion worth of shares remaining under its existing authorization.
NTAP also announced a dividend of 52 cents payable on Oct. 23 to shareholders of record as of the close of business on Oct. 4.
Impressive Estimates Activity
The Zacks Consensus Estimate for NTAP’s fiscal 2025 and 2026 revenues is pegged at $6.57 billion and $6.85 billion, respectively, which indicates year-over-year growth of 4.9% and 4.2%.
The Zacks Consensus Estimate for earnings per share for fiscal 2025 and 2026 is pegged at $7.03 and $7.49, respectively, which implies a rise of 8.8% and 6.4% year over year.
The Zacks Consensus Estimate for fiscal 2025 and 2026 EPS has increased 2.5% and 2%, respectively, in the past 60 days, reflecting analysts’ optimism.
NTAP’s Favorable Rank & Growth Score
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at present.
Apart from a favorable rank, NTAP has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
Other Stocks to Consider
Other top-ranked stocks worth consideration in the broader technology space are Manhattan Associates (MANH - Free Report) , Adobe (ADBE - Free Report) and ANSYS (ANSS - Free Report) . While Manhattan Associates sports a Zacks Rank #1 (Strong Buy), Adobe and ANSYS carry a Zacks Rank #2 (Buy) 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 is pegged at $4.26, unchanged in the past 30 days. MANH’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 26.6%. The stock has surged 33.9% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2024 EPS is pegged at $18.18, increased 2 cents in the past 30 days. ADBE’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 2.6%. The long-term earnings growth rate is 13.1%. Its shares have declined 2% in the past year.
The Zacks Consensus Estimate for ANSS’ 2024 earnings is pegged at $9.96, unchanged in the past 30 days. ANSS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while missing the mark once, with the average surprise being 4.8%. Its shares have gained 2% in the past year