Why Underappreciated NetApp Is Ready to Rally
After the close on May 28, NetApp ($NTAP) released strong Q4 earnings, and the stock surged more than 20%. Since then, the stock has settled down and appears to be in buy territory.
Future growth catalysts are stacking up and becoming too hard to ignore. Wall Street could continue to show the shares some love.
This is another current holding in my Select Equity strategy and represents the second stock of three. If you missed my first stock writeup on Comfort Systems USA ($FIX), click HERE to read it.
New Developments That Matter Now
- The company’s AI Data Engine, co-engineered with Nvidia ($NVDA), could drive growth in managing AI workloads.
- Expanding partnerships and solutions for AI—including the recent collaboration with Cisco ($CSCO)—enhance the ecosystem and lay the groundwork for future revenue expansion.
- The company’s new high-performance storage systems (EF series) show strong promise.
But there is more.
Other supporting factors for growth include continued strength in all-flash arrays, public/hybrid cloud services, and innovation in StorageGRID and Flex Unified.
Trading Tactics
The stock broke out from a base and is now pulling back near the 50% retracement level of that move. This pullback offers a chance to nibble on the stock.
You can complete the trade on a break above the minor downtrend line from the recent peak. A breakout from the pennant pattern would provide classical technical confirmation of a continued uptrend.
Wall Street Analysts Could Get More Bullish
According to TipRanks, 15 Wall Street analysts who have issued 12-month price targets for NetApp in the last three months have an average target of $171.30, with a high of $200 and a low of $155. At the recent price of $156.69, the average target implies only a 9.33% potential upside.
Based on the fundamental developments, analysts may turn more bullish and raise their targets as the new catalysts gain attention. Currently, only five analysts have a Buy rating, with nine Holds and one Sell. If this balance shifts to better reflect the building fundamental momentum, the stock could come back to life and rally.
This is a current holding in my Select Equity strategy and represents the second stock of three.
Bottom Line
The NetApp trade idea today is to buy on this pullback and complete the position (full investment) on a breakout above the minor downtrend line. The fundamental backdrop has stacked up multiple growth drivers that do not yet appear to be fully priced in.
Stay tuned for the third stock trade idea.
I welcome your comments. I read and appreciate them.
At the time of publication, Llanes had a position in NTAP.
