Despite 10% Rise In The Past Week, NetApp Stock Still Looks Like A Buy

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NetApp Inc. stock (NASDAQ: NTAP) has seen an impressive rise of 10% over the past week and currently trades at around $88 per share. The stock rally was driven by the announcement of Q1 2022 earnings last week (NTAP’s fiscal year ends in April), while also being aided by the rise in the S&P 500. The company reported revenues at $1.46 billion, up from $1.3 billion in Q1 2021, driven by a jump in both services and product revenue. COGS and SG&A expenses rose at a slower rate, and combined with a drop in R&D expenses, this helped operating income rise from $136 million in Q1 ’21 to $249 million in Q1 ’22. A drop in the effective tax rate further boosted profitability, driving EPS up from $0.35 to $0.91 over this period.

After the recent rally, will NetApp stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price data for the last ten years, returns for NetApp stock average close to 3% in the next one-month (21 trading days) period after experiencing a 9.5% rise over the previous one week (five trading days) period. But how would these numbers change if you are interested in holding NTAP stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test NetApp stock chances of a rise after a fall and vice versa. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

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IF NetApp stock moved by -5% over five trading days, THEN over the next 21 trading days, NetApp stock moves an average of -0.1 percent, with an average 53% probability of a positive return.

Some Fun Scenarios, FAQs & Making Sense of NetApp Stock Movements:

Question 1: Is the average return for NetApp stock higher after a drop?

Answer:

Consider two situations,

Case 1: NetApp stock drops by -5% or more in a week

Case 2: NetApp stock rises by 5% or more in a week

Is the average return for NetApp stock higher over the subsequent month after Case 1 or Case 2?

NetApp stock fares better after Case 2, with an average return of -0.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 1.7% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how NetApp stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer:

If you buy and hold NetApp stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For NetApp stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

Question 3: What about the average return after a rise if you wait for a while?

Answer:

The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

NetApp’s returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for NetApp stock by changing the inputs in the charts above.

 

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market since 2016.

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