NetApp Stock Has Recovered 20% So Far, But Another 40% Gain Cannot Be Ruled Out

Comparing the trend in NetApp’s (NASDAQ: NTAP) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 40% to reach almost $60, once fears surrounding the coronavirus outbreak subside. Our conclusion is based on our detailed comparison of NetApp’s performance vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did NetApp Stock Fare Compare With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19, with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. NetApp stock lost 34% of its value (identical to a 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 22% over recent weeks (vs. about 27% gain in the S&P 500) to its current level around $43. Despite the recovery, the stock is still down 30% since the beginning of the year.

NetApp’s Stock Has Fallen Because The Situation On The Ground Has Changed

The decline in Netapp’s stock is understandable, considering the impact that the outbreak and a broader economic slowdown are likely to have on total industrial and economic activity. This is likely to adversely impact the company’s revenues as major companies are likely to delay expenses related to upgrading infrastructure and software. Notably, the company derives a bulk of its revenues from the U.S., which has become the new epicenter of the outbreak – recording the largest numbers of COVID-19 cases across the globe.

But NetApp Stock Witnessed Something Similar During The 2008 Downturn

• We see NetApp stock declined from levels of around $23 in October 2007 (the pre-crisis peak) to levels of around $12 in March 2009 (as the markets bottomed out) – implying the company’s stock lost as much as 50% from its approximate pre-crisis peak. This marked a similar drop to the broader S&P, which fell by about 51%.
• However, NetApp stock recovered strongly post the 2008 crisis to about $30 in early 2010 – rising by 159% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will NetApp’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that NetApp stock fell 34% from the market peak on February 19 to the low on March 23 compared to the 50% decline during the 2008 recession, we believe it can potentially recover by 40% to levels near $60 once economic conditions begin to show signs of improving. This marks a full recovery to the $60 level NetApp stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture. It complements our analyses of the coronavirus outbreak’s impact on a diverse set of NetApp’s multinational peers, including Cisco and F5 Networks. The complete set of coronavirus impact and timing analyses is available here.

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