NetApp’s Stock Up 46%. What’s Next?

Note: NTAP FY’2024 ended in April

NetApp (NASDAQ:NTAP) a company that provides on-premises data storage systems and public cloud services, has increased close to 46% since the beginning of 2024, outperforming the broader markets, with the S&P500 index up 28%.

After facing headwinds in FY’24 due to large businesses’ reduced IT spending and cost optimization, NetApp’s core Hybrid Cloud business is showing signs of recovery. In the first half of FY’25, revenue grew 6% year-over-year to $1.5 billion. This momentum is driven by Hybrid Cloud’s comprehensive portfolio, which provides unified data storage, storage management, and infrastructure solutions for data center modernization, supporting both structured and unstructured data, and encompassing software, hardware, support, and services. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

NetApp is also poised to benefit from the demand for artificial intelligence, which should call for more of the company’s hardware and tools for deployment in large-language model environments. Moreover, the company could see higher sales of its flash-based products instead of lower-speed hard disk-based products which could cause bottlenecks in AI systems. Additionally, flash-based memory is likely to work better with high-performance GPUs from the likes of Nvidia and AMD. As AI moves from the training phase to the deployment phase, into public cloud infrastructure, NetApp could see demand for its hardware rise further.

The increase in NTAP stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 42% in 2021, -33% in 2022, 51% in 2023, and 34% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.

We believe that NetApp’s valuation is fair, with the stock trading at a little over 18x consensus FY’25 earnings. Our price estimate for NTAP stock stands at about $130, almost in line with the market price (Jan 22). The company’s full-year revenue guidance has been lifted to $6.54-$6.74 billion, with expected growth at approximately 6%. It also anticipates full-year EPS to be in the range of $7.20-$7.40, a 13% y-o-y growth.

NetApp also expects its total addressable market to expand by more than $100 billion by 2027. The company sees an incremental $40 billion from the all-flash data market, $27 billion in file and block storage, $27 billion from the public cloud, and another $14 billion from artificial intelligence storage space. NetApp’s margins are also likely to trend higher driven by a higher mix of all-flash array sales, and higher cloud and services. See our analysis on NetApp Valuation: Is NTAP Stock Expensive Or Cheap? for more details on what’s driving our price estimate for NetApp.

[1] Returns as of 1/23/2025
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates