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Why NetApp, Inc. Stock Rose 42% in the First Half of 2018

By Anders Bylund - Jul 14, 2018 at 2:40PM

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The data-management veteran is enjoying a second wind thanks to the success of its cloud and solid-state solutions.

What happened

Shares of NetApp (NTAP -0.18%) gained 42% in the first half of 2018, according to data from S&P Global Market Intelligence. The maker of software and tools for managing large volumes of data storage continued a bounce that started last November; share prices have doubled over the past 12 months.

Computer rendition showing several streams of ones and zeros racing along an inner-city highway.

Image source: Getty Images.

So what

It hasn't been all rainbows and smooth sailing for NetApp. February's third-quarter report beat Wall Street's direct estimates but was paired with third-quarter guidance merely in line with current analyst targets. The stock fell 13% the next day, setting new investors up for fantastic returns as NetApp got back to its newfound beat-and-raise habits three months later.

Now what

The secret sauce behind NetApp's resurgence is found in its solid-state storage products and cloud-based data management services, reported as a bundle under the "strategic solutions" code name. Revenue growth is accelerating in these high-margin operations, which accounted for 74% of NetApp's total sales in May's fourth-quarter update.

Management says that the switch to flash and cloud storage is "still in its early innings," leaving plenty of room for further growth. That's the kind of talk that gets investors excited, especially when it's backed up by actual results.

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