Despite A Rise In Sales, Here’s Why NetApp Stock Has Underperformed The S&P

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NetApp Inc. (NASDAQ: NTAP) stock price gained 16% from $60 in late 2018 to almost $70 currently, primarily due to a steady rise in its revenues. Additionally, over this period, the company also witnessed a strong rise in its revenue per share, driven by a drop in its outstanding share count. Despite this, due to a drop in the P/S multiple, the company’s stock largely underperformed the S&P 500, which grew more than 55% during this period.

In our interactive dashboard, Why NetApp Stock Moved: NTAP Stock Has Gained 16% Since 2018, we break down the factors behind this move.

(A) NetApp’s Total Revenue has risen 9% from $5.9 billion in FY 2018 to $6.5 billion currently

  • NetApp’s total revenue initially fell from $5.9 billion in FY ’18 to as low as $5.4 billion in FY ’20, before recovering to $6.3 billion by FY ’22 (NTAP’s fiscal year ends in April), and currently stands even higher at $6.5 billion.
  • As of FY ’22, NetApp derives its sales almost equally from its two segments, products (52%) and services (48%).
  • Most of the sales growth since FY ’19 has been driven by a rise in sales from the services segment, demand for which continues to grow steadily even now.
  • For details about NetApp revenues and comparison to peers, see NetApp (NTAP) Revenue Comparison
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  3. Here’s Why NetApp Stock Has Failed To Outperform The S&P
  4. Here’s Why NetApp Stock Has Underperformed The Market Since 2018
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(B) Revenue per share (RPS) increased 29% from $22.60 in FY 2018 to $29.25 currently

  • NetApp revenue rose from $5.9 billion in FY ’18 to $6.5 billion currently, while its outstanding share count dropped from 261.9 million in FY ’18 to 220.6 million currently.
  • Due to this, RPS has risen steadily from $22.60 in FY ’18 to $29.25 currently.

(C) Price-To-Sales (P/S) multiple for NetApp rose from 2.6x in 2018 to 3.6x by 2021 end, and currently stands at 2.4x, still lower than its 2018 level

  • NetApp’s P/S multiple jumped to 3.6x by late 2021, on the back of rising investor expectations surrounding continued demand growth for its products and stronger demand for its services.
  • However, due to the current increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 2.4x.
  • For additional details about the company’s stock returns and comparison to peers, see NetApp (NTAP) Stock Return Comparison.

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 Returns Oct 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 NTAP Return 12% -25% 97%
 S&P 500 Return 8% -19% 73%
 Trefis Multi-Strategy Portfolio 6% -22% 209%

[1] Month-to-date and year-to-date as of 10/31/2022
[2] Cumulative total returns since the end of 2016

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