Is the Time Ripe to Build Positions in NetApp (NTAP)?

Are you looking for a hotstock that has high chances of outperforming in 2017? NetApp Inc. NTAP should then find a place in your portfolio.

Shares of the company have been escalating since it reported impressive third-quarter fiscal 2017 results. The indicators of a stock’s bullish run include a rise in its share price and continued uptrend in estimates.

We note that NetApp outperformed the Zacks  Computer Storage Devices  industry in the last one year. While the stock returned 54.8%, the industry gained 39.7%.

Estimate Revision

In the last 30 days, the Zacks Consensus Estimate for NetApp’s current quarter and fiscal 2017 witnessed upward revisions. For the current quarter, the Zacks Consensus Estimate is pegged at 67 cents per share, up from 60 cents per share earlier. The Zacks Consensus Estimate for fiscal 2017 is now pegged at $2.09 per share compared with $1.91 projected 30 days ago.

Impressive Q3 Results

NetApp reported third-quarter fiscal 2017 non-GAAP earnings (excluding stock-based compensation) of 82 cents per share, up 17.1% year over year and 36.7% sequentially. Earnings (including stock-based compensation) were 68 cents, which beat the Zacks Consensus Estimate by 9 cents.

Revenues increased 1.3% from the year-ago quarter and 4.8% from the previous quarter to $1.40 billion, which beat the Zacks Consensus Estimate of $1.39 billion. The figure was within management’s guided range of $1.325-$1.475 billion.

Further, NetApp noted that all-flash array business soared 160% year over year to an annualized net revenue run rate of almost $1.4 billion. The company is gaining market share against the likes of Hewlett-Packard Enterprise Company HPE and EMC (now acquired by Dell).

Strong Guidance

For fourth-quarter fiscal 2017, NetApp expects non-GAAP earnings in the range of 79-84 cents per share. Net revenues are anticipated in the range of $1.365-$1.515 billion. The Zacks Consensus Estimate for earnings and revenues are pegged at 67 cents per share and $1.443 billion, respectively.

The company anticipates strong strategic solutions growth will improve product revenue growth trajectory in the rest of fiscal 2017.

Encouraging top and bottom-line guidance for the first quarter also helped in boosting investors’ confidence in the company.

Other Driving Factors

NetApp is a leading provider of innovative enterprise storage and data management solutions that simplify the complexities of storing, managing, protecting, and retaining enterprise data.

We believe that continued momentum in the flash-based solutions space, with the newly introduced all-flash array will drive NetApp’s results going forward. Additionally, the company’s improving penetration in the mid-size business segment is a positive.

Moreover, NetApp’s recent product launches and expanding product portfolio will drive top-line growth in the near term. Further, the company is focused on consolidating its international footprint.

Notably, the acquisition of SolidFire in Feb 2016 has further strengthened NetApp’s position in the all-flash array market by adding new flash offerings. We believe that the acquisition will expand NetApp’s customer base and market share due to higher demand from enterprises going forward.

Considering these positives, we believe that NetApp is one such technology stock that deserves a place in investors’ portfolio.

NetApp also delivered positive earnings surprises in three out of the last four quarters with an average beat of 19.5%.

Given the company’s long-term earnings per share growth rate of 10.43%, VGM Style Score  of “B” and a Zacks Rank #1 (Strong Buy), we believe that the stock still has much upside left.

Other Stocks to Consider

Other stocks worth considering in the broader technology sector are Seagate Technology plc STX and Western Digital Corp. WDC , both sporting a Zacks Rank #1. You can see  the complete list of today’s Zacks #1 Rank stocks here

Seagate, Western Digital and Micron have a long-tern expected earnings growth rate of 8.17% and 12.11%, respectively.

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Western Digital Corporation (WDC): Free Stock Analysis Report

Seagate Technology PLC (STX): Free Stock Analysis Report

NetApp, Inc. (NTAP): Free Stock Analysis Report

Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report

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