Key Points
NetApp shares reached their peak value of $100 in 2000.
After this week’s earnings report, they could soon be back there.
This stock has a lot of potential, as the report surprised investors.
5 stocks we prefer over NetApp
NetApp, Inc. NASDAQ: NTAP is one of the few tech stocks that has not yet reached its highs from the Dot Com bubble. The last time NetApp’s shares set a record was when Bill Clinton was still in the White House. However, there is now an ample opportunity for growth.
The data stock has been gaining momentum since the start of the year. Although its performance was not outstanding, its shares had increased by approximately 30% prior to this week. For comparison, the benchmark S&P 500 index had risen by approximately 20% during the same period, indicating that NetApp was slightly outperforming the market.
However, heading into the last month of the year, the situation changed. The San Jose-based company released its Q2 earnings earlier this week, which pleasantly surprised analysts. While the year-on-year revenue was still down, the topline revenue exceeded expectations, and the company’s earnings per share were 13% higher than the consensus.
Bullish outlook
Delivering better-than-expected headline numbers is always a positive start to a report, particularly for stocks like NetApp, which generally trade with less volatility than their more well-known peers. The report continued to improve, with the company’s forward revenue and earnings guidance also surpassing expectations. Delivering an upside surprise on the outlook is precisely what Wall Street wishes to see, as it indicates that a stock is likely undervalued and requires a major re-evaluation. When the surprise is positive, it suggests there will be significant gains.
Having begun the week with a 30% gain year-to-date, NetApp shares appear poised to conclude the week with a 50% gain for the year. They surged 10% at the opening of trading on Wednesday as investors hurried to participate in the action, and these gains continued throughout yesterday’s session. After trading mostly sideways since July, NetApp’s stock has surged by 16% in just two days and is approaching last year’s peak.
A further 5% increase would bring it close to the $100 level, a value not seen since November 2000. Given the volume of bids in yesterday’s session, it appears likely to be achieved in the very near future.
Getting involved
This change of events is intriguing, considering that just two weeks ago, Bank of America advised caution on the stock. Prior to NetApp’s earnings release, the Bank of America team took a bearish stance on the upcoming quarters and anticipated some medium-term weakness. This was due to industry-wide concerns, particularly regarding corporate spending on data storage software, which they described as “cautious.”
However, the Bank of America team appears to have been mistaken after Tuesday’s report dispelled any worries about a prolonged slowdown. On the back of the company’s more optimistic outlook, the TD Cowen team reaffirmed their Outperform rating on the stock and raised their price target to a street high of $100, highlighting the strength of the stock and its potential for further gains in the coming weeks.
For those on the sidelines, now is a good time to consider taking a position. Although the stock has surged sharply this week and may seem like it is being chased, it is undergoing a fundamental repricing. Negative scenarios that were previously feared have not materialized, and shares are on the verge of reaching their highest level in over twenty years. NetApp shares have both fundamental and technical support, and there is every reason to believe they will continue to rally into 2024. Before you consider NetApp, you’ll want to hear this. While NetApp currently has a “Hold” rating among analysts, top-rated analysts believe these five stocks are superior investments. View The Five Stocks Here Click the link below and we’ll send you usafinancetrends’ guide to investing in electric vehicle technologies (EV) and which EV stocks show the most promise. Get This Free Report
