Is It The Right Time To Add NetApp (NTAP) To Your Portfolio?

Almost two weeks have passed since NetApp Inc. (NASDAQ:NTAP) released its first-quarter fiscal 2017 results, which led to a rally in shares. To some investors, choosing the stock may appear to be a no-brainer. This is because, immediately after an earnings release, a company is almost always on investors’ radar. While better-than-anticipated results make it a favored pick, lower-than-expected results dampen investors’ sentiment. So, the period after earnings releases proves to be the right time for investors to put their money into stocks or disinvest.

Shares Marching Higher

Since NetApp reported its quarterly numbers on Aug 17, 2016, its shares have gained approximately 20%. The company’s earnings as well as revenues trumped estimates in first-quarter fiscal 2017. In the fiscal first quarter, this enterprise storage and data management solution provider reported adjusted earnings (including stock-based compensation but excluding amortization and other one-time items) per share of 28 cents, which surpassed the Zacks Consensus Estimate of 18 cents and also witnessed a whopping seven-fold year-over-year jump.

Further, net revenue came in at $1.294 billion, above the Zacks Consensus Estimate of $1.264 billion as well as the mid-point of its own guidance range of $1.20 billion to $1.35 billion (mid-point $1.275 billion).

Favorable Estimate Revisions

Following NetApp’s stellar performance, the Zacks Consensus Estimate witnessed an uptrend as analysts raised their estimates. Analysts polled by Zacks are convinced that this Zacks Rank #1 (Strong Buy) stock will see an upbeat performance in the future as well. Over the past 30 days, the Zacks Consensus Estimate for fiscal 2016 increased from $1.62 to $1.39 per share.

Flash-based Solution Expansion Impressive

NetApp has a dominant position in the flash storage market. In a move to further solidify its position in the space, the company acquired SolidFire Inc. – a global leader in flash storage systems – for faster access to insights from Big Data early this year.

SolidFire’s flash storage arrays, instead of focusing on improving cache performance, act as primary storage for applications requiring high speed, such as cloud computing and virtualization. This simplifies the storage system and decreases fetching time, thereby increasing speed.

Further, SolidFire’s flash arrays are built on Next Generation Data Centers that simplify operations and enable rapid deployment of new applications. These features make it more cost effective in our view.

Therefore, we believe the acquisition will extend NetApp's flash leadership position as well as expand its customer base and market share due to higher demand from enterprises going forward.

Other Stocks to Consider

Some other favorably ranked stocks in the broader technology sector are Datalink Corporation (NASDAQ:DTLK) , Seagate Technology Plc (NASDAQ:STX) and Cirrus Logic Inc. (NASDAQ:CRUS) , all of which sport a Zacks Rank #1.

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