NetApp, a company specializing in on-premises data storage systems and public cloud services, has seen its stock increase by 46% since the beginning of 2024, significantly outperforming the broader market, with the S&P 500 up 28% during the same period.
After struggling in FY’24 due to reduced IT spending and cost optimization by large businesses, NetApp’s 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 growth is attributed to the company’s comprehensive Hybrid Cloud portfolio, which provides unified data storage, management, and infrastructure solutions, supporting both structured and unstructured data.
NetApp is also well-positioned to benefit from the increasing demand for artificial intelligence. The company’s hardware and tools are crucial for large-language model environments, and as AI transitions from the training phase to deployment, demand for NetApp’s flash-based products is expected to rise. Flash memory is more compatible with high-performance GPUs from companies like Nvidia and AMD, making it essential for AI systems.
Over the past four years, NetApp’s stock returns have been volatile, with significant fluctuations, including 42% in 2021, -33% in 2022, 51% in 2023, and 34% in 2024. Despite this volatility, NetApp’s valuation is considered fair, with the stock trading at just over 18x consensus FY’25 earnings.
The company’s revenue guidance has been lifted to $6.54-$6.74 billion, with expected growth of about 6%. EPS is projected to grow 13% year-over-year, reaching $7.20-$7.40.
NetApp also anticipates its total addressable market will expand by more than $100 billion by 2027, driven by demand in the all-flash data market, file and block storage, public cloud, and artificial intelligence storage.
As the company shifts towards higher-margin all-flash array sales and increases its focus on cloud and services, margins are expected to trend higher, further boosting its stock potential.
NetApp’s stock is currently valued at about $130, aligning with its market price as of January 22, and investors remain optimistic about the company’s future growth trajectory.
