NTAP Stock: Gaining from the Diverse Data-Driven Era

NTAP Stock
Credit: iStock.com/traviswolfe

NetApp Stock Rises on Impressive Results

Today’s stock represents one of our preferred investment strategies of investing in stocks that stand to gain from the trend of digital transformation, which has become critical to survive and thrive in this era. Such businesses are most likely to gain in the coming years as they help enterprises achieve their goals.

The case in point being NetApp Inc. (NASDAQ:NTAP), a leading provider of enterprise storage solutions that harnesses the power of hybrid cloud. Its products and solutions portfolio help its customers in their digital transformation phases like modernizing storage and data management and building next-generation data centers. NetApp is a dominating player in data insight, access, and control for hybrid cloud environments. It provides global organizations the ability to manage and share their data across on-premises, private, and public clouds.

Unifying data across a wide range of cloud and on-premises environments has become imperative for enterprises today. With its expertise in data management, NetApp is helping its customers achieve this goal and NTAP stock is getting stronger. The company has gradually transitioned itself to the high-growth segments of all-flash arrays, hyperconverged infrastructure, and hybrid cloud. And this strategy has been successful as can be seen from the strong growth in its strategic solutions that accounted for 69% of net product revenue in the second quarter.

The so-called “Data Fabric” strategy seems to be working as the storage space undergoes many changes. The NetApp Data Fabric is a platform that empowers its customers to seamlessly integrate and unleash the potential of their data in a cloud, hybrid, and on-premises world.

As per the research report by MarketsandMarkets, the next generation data storage market is expected to touch almost $145.0 billion by 2022, posting a CAGR of 16.76% between 2016 and 2022. This growth is primarily driven by the increasing volume of digital data, increasing the proliferation of smartphones and tablets, as well as the growth of the Internet of Things (IoT) market. (Source: “Next-Generation Data Storage Market worth 144.76 Billion USD by 2022,” MarketsandMarkets, November 2016.)

NetApp is not only able to revive its sales in the flash memory-based storage category, but also has started offering a hyperconverged infrastructure (HCI) solution, which is becoming more popular these days. This bodes well for the future demand and NetApp stock in the coming quarters.

NTAP stock also got a strong push following the announcement of its second-quarter results last month. The company delivered strong operating results on both top and bottom lines. Net revenue was $1.42 billion, an increase of six percent year-over-year, and adjusted earnings per share were $0.81, an increase of 35% year-over-year. There was a significant improvement in margins in almost all categories.

NetApp also introduced a number of industry-leading innovations that position the company for continued growth and expand its leadership position in the growth segments of the market. The management states that there was a growing preference for the value of NetApp’s Data Fabric strategy.

The company has been able to transition its business away from the declining segment to the data-driven high-growth segments of all-flash arrays, HCI, and hybrid cloud. The optimism surrounding the continued strong performance is reflected in the rise of NetApp stock.

NTAP stock is up about 75% in the last five years and has gained about 58% over the last one year. The following chart shows that this journey has not been smooth. Company-specific issues as well as industry challenges have been behind this bumpy ride. However, over the last year, management has been executing its strategy better and has been rewarded by the market.

NTAP stock chart

Chart courtesy of StockCharts.com

Analyst Take: 

NetApp enables its customers to meet the exponential data growth in the digital era where they are required to manage a complex hybrid world with data residing in data centers, the cloud, and externally linked platforms. As the company introduces innovative products and solutions to adapt to the changing trends in storage, NTAP stock shall continue to ride higher in the coming years.  

With a focus on digital transformation, data has become the lifeblood of organizations. NetApp enables organizations to meet the challenge of becoming data-centric in an environment where data is dynamic and distributed. Investors should consider taking advantage of this trend. As NetApp stock is hovering near record highs, investors could build a position on any sign of weakness.