Here’s Why NetApp Stock Has Failed To Outperform The S&P

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NetApp Inc. (NASDAQ: NTAP) stock price gained just 8% from $60 at 2018 end to almost $65 currently, primarily due to a slight rise in its P/S multiple. However, the company also witnessed a steady rise in its revenue per share, driven by a marginal rise in sales and a drop in its outstanding share count. The company’s stock massively underperformed the S&P 500, which grew around 1.5x during this period.

In our interactive dashboard, Why NetApp Stock Moved: NTAP Stock Has Gained 8% Since 2018, we break down the factors behind this move.

NetApp’s NTAP Total Revenue has risen 2.8% from $6.1 billion in FY 2019 to $6.3 billion currently

  • NetApp’s total revenue initially dropped from $6.1 billion in FY ’19 to $5.4 billion in FY ’20, before pulling back up to $6.3 billion in FY ’22 (NTAP’s fiscal year ends in April), and currently stands at the same level.
  • As of FY ’22, NetApp’s sales come almost equally from its products (52%) and services (48%) divisions.
  • However, just two years ago in FY ’20, sales from its services segment stood at 44%, and most of the sales growth since then has been driven by a rise in sales from services.
  • For details about NetApp revenues and comparison to peers, see NetApp Revenue Comparison

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Revenue per share increased 17% from $24.18 in FY 2019 to $28.30 currently

  • NetApp revenue rose from $6.1 billion in FY ’19 to $6.3 billion currently, while the outstanding share count dropped from 254.1 million in FY ’19 to 223.3 million currently.
  • Due to this, RPS has risen steadily from $24.18 in FY ’19 to $28.30 currently.

Price-To-Sales (P/S) multiple for NetApp has risen from 2.2x in 2019 to 3.5x by 2021 end, and currently stands at 2.3x, just marginally higher than its 2019 level

  • NetApp’s P/S multiple jumped to around 3.5x by late 2020, on the back of rising investor expectations surrounding continued demand growth for its products and services.
  • However, due to the current increased economic uncertainty weighing on the broader markets, the P/S multiple has pulled back, currently standing at around 2.3x.
  • For additional details about the company’s stock returns and comparison to peers, see NetApp Stock Return Comparison.

Stock prices have fallen precipitously across sectors over recent months and we are now in a bear market for the first time since March 2020, when the Covid-19 outbreak triggered a market crash. We capture key trends in the Dow during and after major market crashes in our interactive dashboard analysis, ‘Market Crashes Compared.’

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