NTAP Stock Poised for Strong Rebound

Rising interest rates continue to hammer growth stocks, with the tech-heavy Nasdaq in bear-market territory, down by 31% from its November high.

Even cash-laden, profitable companies that report excellent financial results have been getting dragged down by nervous investors. A good example of that is NetApp Inc. (NASDAQ:NTAP), a provider of cloud-based data management products.

The company recently reported outstanding financial results for the fourth quarter of fiscal 2022. NetApp Inc. has been using its strong cash position to reward investors through a generous share repurchase program and frothy dividends.

During the fourth quarter, the company launched a number of new products and completed its acquisition of Fylamynt, a cloud operations automation company. Subsequent to the end of the quarter, NetApp Inc. acquired Instaclustr, a provider of open-source data and workflow applications as a service.

Despite all this positive action, NetApp stock has seen its share price trend steadily lower since hitting a record high of $96.82 in early January. As of this writing, NTAP stock is down by:

• Five percent over the last month
• 25% over the last three months
• 27% over the last six months
• 28% year-to-date
• 17% year-over-year

If any tech stock is poised to rebound significantly after the stock market bottoms, it’s NetApp stock. Even Wall Street analysts are on board with NetApp Inc. They have a 12-month share-price target in the range of $90.64 to $120.00. This points to potential gains from NTAP stock in the range of approximately 40% to 85%.

About NetApp Stock

NetApp Inc. is a cloud-led, data-centric software company that enables its customers to securely share data on-premises and in the Cloud. The company operates through two segments: Hybrid Cloud and Public Cloud. (Source: “NetApp Reports Fourth Quarter and Fiscal Year 2022 results,” NetApp Inc., June 1, 2022.)

On top of that, the company offers artificial intelligence, data management, data protection, enterprise applications, and other services. (Source: "Home Page," NetApp Inc., last accessed June 29, 2022.)

The company serves industries including automotive; financial services; government; health care; media and entertainment; manufacturing, oil and gas; and video game development. (Source: "NetApp Solutions: By Industry," NetApp Inc., last accessed June 29, 2022.)

Its customers include major companies like AstraZeneca plc (NASDAQ:AZN), DreamWorks Animation, and Dow Jones. (Source: "Customer Success Stories," NetApp Inc., last accessed June 29, 2022.)

Great Q4 2022 Results

For the fourth quarter of fiscal 2022 ended April 29, 2022, NetApp announced that its revenue increased by 7.6% year-over-year to $1.7 billion. Its Hybrid Cloud revenue went up by 4.6% year-over-year to $1.6 billion, while its Public Cloud revenue climbed by 81% year-over-year to $120.0 million. (Source: NetApp Inc., June 1, 2022, op. cit.)

The company's fourth-quarter billings went up by 16% year-over-year to $2.0 billion. NetApp Inc.'s product revenue went up by six percent to $894.0 million—its fifth consecutive quarter of year-over-year growth.

The company's fourth-quarter 2022 net income was $259.0 million, or $1.14 per share, versus fourth-quarter 2021 net income of $334.0 million, or $1.46 per share. Its adjusted earnings per share were $1.42, compared to $1.17 in the same prior-year period.

NetApp Inc. ended the fourth quarter of fiscal 2022 with $4.1 billion in cash.

For full-year fiscal 2022, the company's total revenue went up by 10.1% year-over-year to $6.3 billion. Its Hybrid Cloud revenue advanced by 6.6%, while its Public Cloud revenue expanded by 99%.

The company's full-year fiscal 2022 net income went up by 28% year-over-year to $937.0 million, or $4.09 per share. Its adjusted net earnings per share were $5.28 in fiscal 2022, compared to $4.06 in fiscal 2021.

George Kurian, NetApp Inc.'s CEO, noted, “Our solid fourth quarter results cap off a strong year. We made sustained progress against our strategic goals: gaining share in enterprise storage, expanding our public cloud business, and, most notably, delivering record levels of gross margin dollars, operating income, and earnings per share.” (Source: NetApp Inc., June 1, 2022, op. cit.)

Business Outlook

For the first quarter of fiscal 2023, ended July 29, 2022, NetApp expects to report:

• Net revenue in the range of $1.48 billion to $1.63 billion, up from $1.46 billion in Q1 2022
• Earnings per share in the range of $0.72 to $0.82, versus $0.88 in Q1 2022
• Adjusted earnings per share in the range of $1.05 to $1.15, compared to $1.15 in Q1 2022

For full-year fiscal 2023, NetApp expects to report net revenue growth in the range of six to eight percent.

Dividends & Share Repurchases

Unlike the vast majority of tech companies, NetApp Inc. makes loads of money and returns some of it to investors in the form of a growing dividend and share repurchase program.

During the fourth quarter of fiscal 2022, the company returned $361.0 million to investors through share repurchases and cash dividends. In full-year fiscal 2022, NetApp Inc. returned $1.1 billion to shareholders.

NTAP stock pays a quarterly dividend of $0.50 per share, for a yield of 3.1%. The company has raised its dividend every year since 2018.

Analyst Take

Data is big money, and it helps NetApp Inc. report healthy revenue growth and earnings.

The company has a solid balance sheet and more than $4.1 billion in cash. NetApp uses that cash to fund its aggressive merger-and-acquisition strategy, as well as to reward investors with a juicy dividend and share repurchase program.

NetApp stock may be down by 17% over the last 12 months, but it’s poised for serious growth once the stock market bottoms and rebounds.