Buy or Sell NetApp Stock?

NetApp (NTAP) stock has fallen 9.4% during the past day, and is currently trading at $94.11. We believe there is a near-equal mix of good and bad in NTAP stock given its overall Moderate operating performance and financial condition. This is aligned with the stock’s Moderate valuation because of which we think it is Fairly Priced.

Below is our assessment:

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Let’s get into details of each of the assessed factors but before that, for quick background: With $19 Bil in market cap, NetApp provides software, systems, and cloud services for data management and sharing across on-premises, private, and public clouds, including cloud storage, control solutions, and storage-as-a-service.

[1] Valuation Looks Moderate

This table highlights how NTAP is valued vs broader market. For more details see: NTAP Valuation Ratios

[2] Growth Is Weak

• NetApp has seen its top line grow at an average rate of 0.6% over the last 3 years
• Its revenues have grown 2.5% from $6.5 Bil to $6.6 Bil in the last 12 months
• Also, its quarterly revenues grew 2.8% to $1.7 Bil in the most recent quarter from $1.7 Bil a year ago.

This table highlights how NTAP is growing vs broader market. For more details see: NTAP Revenue Comparison

[3] Profitability Appears Strong

• NTAP last 12 month operating income was $1.5 Bil representing operating margin of 22.6%
• With cash flow margin of 28.0%, it generated nearly $1.9 Bil in operating cash flow over this period
• For the same period, NTAP generated nearly $1.2 Bil in net income, suggesting net margin of about 17.7%

This table highlights how NTAP profitability vs broader market. For more details see: NTAP Operating Income Comparison

[4] Financial Stability Looks Very Strong

• NTAP Debt was $2.7 Bil at the end of the most recent quarter, while its current Market Cap is $19 Bil. This implies Debt-to-Equity Ratio of 14.6%
• NTAP Cash (including cash equivalents) makes up $3.0 Bil of $9.6 Bil in total Assets. This yields a Cash-to-Assets Ratio of 31.3%

[5] Downturn Resilience Is Weak

NTAP has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• NTAP stock fell 39.1% from a high of $95.48 on 13 January 2022 to $58.18 on 28 December 2022 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 1 March 2024
• Since then, the stock increased to a high of $134.62 on 10 July 2024 , and currently trades at $94.11

 
2020 Covid Pandemic

• NTAP stock fell 45.9% from a high of $65.38 on 16 January 2020 to $35.35 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 22 December 2020

 
2008 Global Financial Crisis

• NTAP stock fell 74.3% from a high of $40.49 on 20 February 2007 to $10.39 on 12 November 2008 vs. a peak-to-trough decline of 56.8% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 15 June 2010

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read NTAP Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

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