NetApp, a company that provides data storage systems and cloud services, has seen its stock rise by close to 45% since early January, trading at about $128 per share. Despite facing challenges in its Hybrid Cloud business due to weaker IT spending and cost optimization by large businesses, the company saw revenue grow year-over-year in Q3 and Q4 FY’24. Hybrid cloud revenues rose to $1.516 billion in the most recent quarter, up about 6% compared to last year, offering customers flexibility and control over their IT systems.
The demand for artificial intelligence is expected to benefit NetApp, with the need for its hardware and tools in large-language model environments. The company could see higher sales of its flash-based products, which work better with high-performance GPUs from companies like Nvidia and AMD. As AI deployment increases in public cloud infrastructure, NetApp’s hardware demand may further rise. NTAP stock has seen strong gains, increasing by 100% since early January 2021, outperforming the S&P 500 and showcasing potential for continued growth.
Arista Networks, which benefits from generative AI, has seen its stock surge by over 300% over the same period as NetApp. Arista, a market leader in high-speed networks catering to hyper-scalers and big corporations in the generative AI trend, is part of the Trefis High Quality Portfolio that has consistently outperformed the S&P 500. NetApp’s valuation is considered fair, trading at slightly over 18x consensus FY’25 earnings with a price estimate at approximately $131. Expected trends driving NetApp’s earnings include the expansion of its addressable market by over $100 billion by 2027, with growth potential in the all-flash data market, file and block storage, public cloud, and artificial intelligence storage space.
NetApp’s margins are expected to increase with a higher mix of all-flash array sales and cloud services. The company has taken steps to cut costs and boost profitability, including laying off about 8% of its workforce in recent months. In comparison to other companies in the industry, NetApp is positioned to benefit from the growing demand for AI and cloud services. Overall, NetApp’s stock performance is expected to continue outperforming the market, as the company leverages its strengths in the evolving IT landscape.
