NetApp (NTAP) Last Update 6/10/21
Related: STX WDC
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
NetApp
STOCK PRICE
DIVISION
% of STOCK PRICE
Product
49.8%
$42.61
Services
24.2%
$20.71
TOTAL
100%
$85.49
$85.49
Yours
Trefis Price
N/A
$78.16
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

NetApp Company

VALUATION HIGHLIGHTS

  1. Product constitutes 50% of the Trefis price estimate for NetApp's stock.
  2. Services constitute 24% of the Trefis price estimate for NetApp's stock.
  3. Software Maintenance constitutes 19% of the Trefis price estimate for NetApp's stock.

WHAT HAS CHANGED?

  1. Latest Earnings - Q3'21
NetApp delivered a steady performance for its fiscal third quarter (ending January 2021), with total revenue increasing year-over-year from $1.40 billion to $1.47 billion, mainly due to a growth in software maintenance revenues. However, rising operating expenses led to a drop in net income from $277 million to $182 million year-over-year. This led to EPS dropping to $0.82 from $1.23 for the same period last year.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of NetApp's value that present opportunities for upside or downside to the current Trefis price estimate of NetApp:

Storage Hardware

  • Products Revenue: We currently forecast NetApp's products revenue to grow at a CAGR of 3% through the end of the Trefis forecast period. However, there could be a 25% upside to the Trefis price estimate if NetApp's products revenue can grow at 8% instead. This is possible, as the next generation storage market is estimated to grow at a CAGR of over 34% till 2023, and NetApp's TAM will also expand.
  • Netapp's Gross Margin: We currently forecast that the company's gross margin will see modest growth to around 67% in the coming years. There could be a 13% upside to the Trefis price estimate if the gross margins were to improve to 70% by the end of our forecast period.

For additional details, select a driver above or select a division from the interactive Trefis split for NetApp at the top of the page.

BUSINESS SUMMARY

NetApp makes money by selling storage hardware and storage software to small and medium businesses as well as large enterprises. NetApp's storage hardware helps customers manage data efficiently and keep the information available and secure. The disks are used for large, data-intensive applications like e-mail, inventory, supply chain, backups and regulatory & compliance information. NetApp's storage software enables customers to use all features and functions related to data storage. Software ships along with the hardware system but is priced separately. Features enabled by NetApp's software include back-up and recovery, replication, and retention.

SOURCES OF VALUE

NetApp Gaining Share in Storage Hardware Market

Over the years NetApp has witnessed an increase in its share of the external disk storage market. In enterprise storage as well, NetApp ranks third in market share currently, third only to Dell and HPE. However, there is a competition from small companies that sell cheap white-box storage systems.

High Profit on Software Sales

NetApp sells licenses for the software used along with NetApp storage hardware. Buyers of NetApp storage software and hardware are primarily corporate IT departments and datacenters that have to store vast amounts of user-generated data.

In addition to the initial software license, NetApp sells maintenance contracts for software updates, patches and support. NetApp has gross margins of more than 90% on software maintenance.

KEY TRENDS

Falling Storage Hardware Prices and Rising Volume

The storage hardware industry is characterized by a decline in dollars earned per Gigabyte (GB) as well as rising volumes of storage sold. According to our estimates, NetApp sold each GB of storage for just under $0.70 in 2013, which further fell to under $0.60 per GB in 2015, $0.50 per GB in 2016, and $0.47 per GB in 2017. We estimate that the price will fall to about 20 cents per GB in the coming years.

Transition To Flash

There has been a sharp decline in NAND pricing over the last few quarters, and several companies are transitioning to flash-based storage devices. NetApp is benefiting from the same. As of Q4 fiscal 2020, only 15% of NetApp's installed base ran all-flash arrays.