NetApp Could Hit $90 on Growth in Hardware Storage Business


NetApp's ( NTAP ) storage hardware market share in terms of gigabytes has been increasing consistently over the years, with 201o witnessing high growth led by success of its unified storage strategy and rising demand by enterprises for high-end storage hardware via cloud computing.NetApp competes mainly with EMC ( EMC ), IBM ( IBM ), HP ( HPQ ) and Dell ( DELL ) in the external disk storage systems market.

While we expect NetApp's hardware storage share to rise to 13% in the coming years, Trefis members project a higher growth level reaching close to 17% by 2013, translating into an upside of 38% to our price estimate for NTAP stock.

We currently have a Trefis price estimate of $64.48 for NetApp's stock , about 16% above the current market price of $55.35.

NetApp Benefits from Single Operating System

NetApp has a single operating system Data ONTAP which supports all of its hardware platforms such as NAS, Fiber Channel SAN and iSCSI SAN. NetApp's products offer several advantages: easier deployment of applications, easier management of storage resources, reducing total cost of ownership for customers, and access to many software features like data backup and retention, provisioning, and automated tiering.

Increasing Demand for Virtualization of Storage Services

There is rising demand for high-end storage hardware from cloud-service providers as cloud storage becomes increasingly used by businesses. According to IDC, storage is the fastest growing cloud service, growing from 9.0% of all cloud service revenues in 2009, or $1.6 billion, to an estimated 14.0% in 2013 or over $6 billion of worldwide IT cloud services revenues.

More than 10% of NetApp's hardware shipped is built on Performance Acceleration Module (PAM) technology, and we believe this shift will drive growth for NetApp's high-end storage hardware in the future.

Member Forecast

The Trefis community forecasts NetApp's storage hardware market share will rise from 13% in 2011 to almost 17% by 2013, compared to the baseline Trefis estimate of inch higher from around 12 to 13% during the same period.

The member estimates imply an upside of 38% to the Trefis price estimate for NetApp's stock, signifying the importance of storage hardware business for the company. This would imply a price estimate of close to $90.

Our complete analysis for NetApp's stock is here .

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 , HPQ , IBM , NTAP



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