NetApp (Listed on Nasdaq): Pure play data storage beats

Why you should care: NetApp could be poised to ride the uptrend of Artificial Intelligence capturing everyone’s interest now. It provides intelligent data infrastructure and services, and cloud data storage. If you are looking for another AI-related company, this could be worth taking a look at.

NetApp’s earnings for 3Q 2023 beat expectations by 13.4%. Revenue declined by 6% from US$1.66 billion a year ago to US$1.56 billion in the current quarter. Gross profit however was slightly higher at US$1.11 billion compared to US$1.09 billion a year ago due to lower cost of products from its hybrid cloud.

Speaking of its revenue segments, NetApp primarily has two segments – hybrid cloud and public cloud. A hybrid cloud combines both the private and public cloud of a company and is the biggest revenue driver for NetApp at about 90% of revenue. Even though the revenue of hybrid cloud has declined to US$1.41 billion in 3Q 2023 from US41.52 billion in 3Q 2022, its profit margins have significantly increased to 73% from 66% over the same period

Market analysts currently have NetApp at a HOLD call and an average target price of US$87. Developments in the AI industry will be crucial to look out for, as competition heightens.

Fluence Energy: Clean and green energy beats out

Why you should care: The clean, green and sustainable trend is still strong in the global markets. Many advanced economies are reiterating their commitment to the net zero carbon emissions goal by 2050. Hence, it is worth taking a good look at such companies offering energy storage solutions and cloud-based software for renewable and energy storage.

Fluence Energy’s (FE) 3Q 2023 earnings beat expectations by 170%, far exceeding projections by market analysts. Key to its strong beat is its strong revenue growth of 25% from 2Q 2023, which brings its full fiscal year revenue of 2023 to US$2.2 billion. This also represents the first time it achieved profitability in 3Q 2023 (US$3.2 million).

Let’s take a deeper look at FE’s financials before this. FE has rapidly ramped up its business with only revenue of US$92 million in 2019, growing upwards by an annual growth rate of 121%. However, it has made consecutive years of losses since 2019, as it seeks to capture a higher market share. It has effectively reduced its inventory by almost two-thirds to US$225 million, which is a good sign that selling activities are going great for the company.

Furthermore, total liabilities have also been reduced to US$796 million in 2023 from US$1.1 billion as its account payables have been reduced with better cash flow management. The market currently has FE at an OVERWEIGHT investment call and an average target price of US$32.5. This gives an implied upside of +26.3%.