An Upside and Downside Case for NetApp

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NetApp's ( NTAP ) most important business division, storage hardware, accounts for roughly 41% of our $53.79 price estimate for the company's stock . NetApp creates innovative storage and data management solutions for small and medium-sized companies around the world. It competes mainly with EMC ( EMC ), IBM (NYSE:IBM), HP (NYSE: HPQ) and Dell ( DELL ) in the external disk storage systems market.

20% Upside Scenario - $64.09 Price Estimate for NetApp Stock

Storage Hardware Market Share

We currently forecast that NetApp's market share of the total storage market (of Gigabytes) will increase from about 11% in 2010 to 12.5% by the end of our forecast period. However, there could be 19-20% upside to our price estimate if NetApp's market share grows at the historical average rate of 1% annually, reaching 18% by the end of our forecast period. This upside could be driven by increasing global demand for cloud storage and unified storage, areas of strength for NetApp.

22% Downside Scenario - $42.18 Price Estimate for NetApp Stock

Storage Hardware Gross Margin

We currently forecast that NetApp's storage hardware gross margin will remain flat at 2010′s heightened levels going forward. Previously, gross margin decreased from 48% in 2005 to 41% in 2008 before rising sharply to 56% in 2010. There could be 21-22% downside to our base case price estimate if gross margin gradually falls back to 2005 levels of about 48% by the end of our forecast period.

See our full analysis for NetApp 's stock her e .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: DELL , EMC , NTAP

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