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NetApp (NTAP)
NASDAQ:NTAP
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NetApp
(NASDAQ:NTAP)71Outperform
Positive Factors
AI Traction
NetApp reported consistent AI traction with more than 100 deals in the quarter and multiple service provider wins, expecting a second half 2025 and beyond inflection with increasing enterprise AI deployments.
Public Cloud Growth
Public cloud sales were again a bright spot, up 21% year-over-year excluding Spot.
Negative Factors
Financial Guidance
NetApp’s fiscal third-quarter results and fourth-quarter guidance came in below consensus across most major key metrics.
NetApp (NTAP) vs. S&P 500 (SPY)
Market Cap
$19.03B
Dividend Yield2.15%
Average Volume (3M)1.97M
Price to Earnings (P/E)17.3
Beta (1Y)1.29
Revenue Growth5.46%
EPS Growth23.49%
CountryUS
Employees11,800
SectorTechnology
Sector Strength48
IndustryHardware & Equipment
Share Statistics
EPS (TTM)5.40
Shares Outstanding203,411,530
10 Day Avg. Volume3,246,665
30 Day Avg. Volume1,973,197
Financial Highlights & Ratios
PEG Ratio0.74
Price to Book (P/B)N/A
Price to Sales (P/S)2.99
Price to Cash Flow (P/CF)12.60
P/FCF Ratio12.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$122.33Price Target Upside30.75% Upside
Rating ConsensusHold
Number of Analyst Covering13
NetApp Business Overview & Revenue Model
Company DescriptionNetApp, Inc. engages in the design, manufacture, marketing, and technical support of storage and data management solutions. It offers cloud data services, data storage software, data backup and recovery, all-flash storage, converged systems, data infrastructure management, ONTAP data security, and hybrid flash storage. The company was founded by David Hitz, James K. Lau and Michael Malcolm in April 1992 and is headquartered in Sunnyvale, CA.
How the Company Makes MoneyNetApp generates revenue through the sale of hardware and software products, as well as cloud and support services. The company's revenue model includes product sales, which comprise the majority of its earnings, driven by its storage systems and data management software. Additionally, NetApp derives income from providing support services and maintenance contracts that offer technical assistance and updates to its customers. The company also earns from its cloud offerings, which include hybrid cloud solutions that enable customers to manage data across on-premises and cloud environments. Key partnerships with major cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud, as well as strategic alliances with technology firms, enhance its product offerings and expand its market reach, contributing significantly to its revenue.
NetApp Financial Statement Overview
Summary
NetApp demonstrates strong profitability and efficient operations, with impressive margins and ROE. The high leverage and low equity ratio pose potential risks to financial stability. Cash flow is solid, but recent declines in free cash flow growth are concerning.Income Statement
NetApp has shown strong profitability with a gross profit margin of 70.99% and net profit margin of 17.78% for the TTM period, indicating efficient cost management and solid earnings. The revenue growth rate for the TTM is 3.26%, which is modest but consistent. EBIT margin stands at 21.00% and EBITDA margin at 26.62%, both healthy figures reflecting operational efficiency.85
Very Positive
Balance Sheet
NetApp's balance sheet shows a high debt-to-equity ratio of 2.52, suggesting significant leverage which could pose risks if not managed carefully. Return on Equity (ROE) is impressive at 129.13%, indicating strong profitability relative to equity. The equity ratio is low at 9.90%, pointing to a lower proportion of equity in the asset base, which may be a concern for stability.73
Positive
Cash Flow
The company has robust cash flow performance with a free cash flow to net income ratio of 1.19, indicating strong cash generation relative to earnings. The operating cash flow to net income ratio is 1.34, highlighting effective cash flow management. However, the free cash flow growth rate is negative at -10.13%, suggesting some challenges in sustaining cash flow growth.80
Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 6.47B | 6.27B | 6.36B | 6.32B | 5.74B | 5.41B | Gross Profit |
| 4.59B | 4.43B | 4.21B | 4.22B | 3.81B | 3.62B | EBIT |
| 1.36B | 1.21B | 1.02B | 1.16B | 1.03B | 945.00M | EBITDA |
| 1.72B | 1.58B | 1.43B | 1.36B | 1.29B | 1.24B | Net Income Common Stockholders |
| 1.15B | 986.00M | 1.27B | 937.00M | 730.00M | 819.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.26B | 3.26B | 3.07B | 4.13B | 4.60B | 2.88B | Total Assets |
| 9.89B | 9.89B | 9.82B | 10.03B | 9.36B | 7.52B | Total Debt |
| 2.65B | 2.65B | 2.39B | 2.64B | 2.63B | 1.67B | Net Debt |
| 749.00M | 749.00M | 73.00M | -1.50B | -1.96B | -1.21B | Total Liabilities |
| 8.74B | 8.74B | 8.66B | 9.19B | 8.68B | 7.28B | Stockholders Equity |
| 1.15B | 1.15B | 1.16B | 838.00M | 685.00M | 242.00M |
| Cash Flow | Free Cash Flow | ||||
| 1.38B | 1.53B | 868.00M | 985.00M | 1.17B | 936.00M | Operating Cash Flow |
| 1.54B | 1.69B | 1.11B | 1.21B | 1.33B | 1.06B | Investing Cash Flow |
| -221.00M | -735.00M | -1.39B | -561.00M | 21.00M | 1.27B | Financing Cash Flow |
| -1.79B | -1.34B | -1.51B | -1.02B | 444.00M | -1.96B |
NetApp Technical Analysis
Negative
93.56
Price Trends
118.72
Negative
120.55
Negative
121.40
Negative
Market Momentum
-4.64
Positive
20.18
Positive
4.01
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NTAP, the sentiment is Negative. The current price of 93.56 is below the 20-day moving average (MA) of 118.07, below the 50-day MA of 118.72, and below the 200-day MA of 121.40, indicating a bearish trend. The MACD of -4.64 indicates Positive momentum. The RSI at 20.18 is Positive, neither overbought nor oversold. The STOCH value of 4.01 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NTAP.
NetApp Risk Analysis
NetApp disclosed 38 risk factors in its most recent earnings report. NetApp reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
NetApp Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
74 Outperform | $251.67B | 27.72 | 20.18% | 2.52% | -5.34% | -30.57% | |
72 Outperform | $24.74B | 9.86 | 10.29% | 2.73% | 3.30% | 25.00% | |
71 Outperform | $19.03B | 17.31 | 114.27% | 2.15% | 5.46% | 23.49% | |
69 Neutral | $20.60B | ― | 6.85% | ― | 14.82% | 14.06% | |
67 Neutral | $234.79B | 39.40 | 22.06% | 2.65% | 1.45% | -20.56% | |
66 Neutral | $66.01B | 14.74 | -179.12% | 1.86% | 7.99% | ― | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% |
* Technology Sector Average
Performance Comparison
NTAP
NetApp
93.56
-7.34
-7.27%
CSCO
Cisco Systems
63.26
15.81
33.32%
IBM
International Business Machines
253.21
67.51
36.35%
HPE
Hewlett Packard Enterprise
18.84
1.22
6.92%
NTNX
Nutanix
77.08
13.65
21.52%
DELL
Dell Technologies
94.07
-21.94
-18.91%
NetApp Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -20.86% | Next Earnings Date: May 29, 2025
Earnings Call Sentiment Neutral
The earnings call presented both positive achievements and challenges. While there was strong growth in specific segments like all-flash arrays and public cloud, and improvements in operating and public cloud gross margins, there were notable execution challenges and unfavorable currency impacts. The company's guidance adjustments and sector-specific weaknesses also added caution. However, the company's strategic positioning and product strength provide a balanced outlook.Highlights
Operating Margin Success
Achieved an operating margin of 30%, above expectations, indicating disciplined management of the business.
Strong Growth in All-Flash Array Business
All-flash array business grew 10% year-over-year, reaching an annualized revenue run rate of $3.8 billion.
Keystone Revenue Growth
Keystone, the Storage as a Service offering, saw revenue growth of nearly 60% year-over-year.
Public Cloud Segment Growth
Public Cloud segment revenue grew 15% year-over-year, with first-party and marketplace cloud storage services growing by over 40%.
Improvements in Public Cloud Gross Margins
Public cloud gross margins improved to 76%, up from 66% in the prior year, marking a 1,000 basis point improvement.
Recognition for Primary Storage
Named a customer's choice for primary storage in Gartner's 2025 Voice of the Customer report.
Lowlights
Sales Execution Challenges
Inconsistent execution resulted in some deals slipping out of Q3, impacting top-line performance.
Impact of Strong U.S. Dollar
The stronger U.S. dollar negatively impacted revenue and EPS, with an expected impact of approximately $30 million less in reported revenue.
Slight Decrease in FY 2025 Guidance
Guidance for FY 2025 was slightly decreased due to the divestiture of Spot by NetApp and FX headwinds.
Decline in Support Revenue
Support revenue declined 2% year-over-year, though it was roughly flat in constant currency.
Global Public Sector Weakness
Expected global public sector weakness, particularly in the U.S., has tempered growth expectations.
Company Guidance
During the NetApp third quarter fiscal year 2025 earnings call, the company provided guidance adjusting its outlook for the fourth quarter and full fiscal year 2025, citing the recent divestiture of Spot by NetApp, the impact of a stronger U.S. dollar, and underperformance in Q3 revenue. The company now expects fiscal year 2025 revenue to range between $6.49 and $6.64 billion, representing approximately 5% year-over-year growth at the midpoint, with consolidated gross margin around 71% and operating margin between 28% and 28.5%. The earnings per share (EPS) forecast for the year is between $7.17 and $7.27, reflecting 12% growth at the midpoint. For the fourth quarter, revenue is projected to be between $1.65 and $1.80 billion, with an EPS range of $1.84 to $1.94. Despite Q3 challenges, the company remains focused on enhancing sales execution and controlling expenses, while maintaining a strong market position in AI and cloud solutions, with the anticipation of continued growth in these areas.NetApp Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
NetApp Appoints Elizabeth O’Callahan as Chief Administrative Officer
Positive
Feb 26, 2025
On February 26, 2025, NetApp announced the appointment of Elizabeth O’Callahan as the Chief Administrative Officer, effective March 3, 2025. In her expanded role, O’Callahan will oversee Legal, Compliance, Government Relations, Sustainability, Human Resources, Workplace Experience, and Corporate Communications. This strategic leadership change aims to enhance operational excellence and align with NetApp’s corporate strategy, reinforcing its commitment to talent development and long-term growth.
Executive/Board ChangesBusiness Operations and Strategy
NetApp Appoints Wissam Jabre as New CFO
Positive
Jan 28, 2025
On January 28, 2025, NetApp announced the appointment of Wissam Jabre as the new Executive Vice President and Chief Financial Officer, effective March 10, 2025. Jabre, who has extensive experience in leading finance organizations, will replace Michael J. Berry, who is retiring but will remain as a senior advisor during the transition. The appointment is expected to drive sustained growth and long-term value for stakeholders as NetApp continues to expand its market share with its intelligent data infrastructure platform.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.