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NetApp's Storing Confidence Ahead of Earnings

We can pound the table and discuss revenue growth and market share all we want. But let's not discount that this is still a very profitable business. It was no accident that management was able to advance gross margin in the May quarter by 170 basis points to reach 60.1%. This led to a net income of $253 million, which grew 4% year over year. Essentially, management knows its products and understands what it takes to drive cash flow.

To that end, given that the total available market for Big Data is projected to grow to as high as $17 billion by 2016, I believe that investors should get in on this stock now since it is just at the cusp of its growth spurt. The current market now stands at just $6 billion.

What's more, Given NetApp's strength in Fabric-Attached Storage and its E-series line of products, the company's excellent strategy and design will continue to appeal to the enterprise.

Along those lines, while enterprise spending has been soft in the first half of the year, I don't believe that businesses can afford to starve themselves for very long -- not if they want to stay in the game. I don't believe CIOs of these companies care about managing their own data storage. I expected NetApp to see a significant chunk of this business.

Accordingly, I would be a buyer here ahead of earnings. On the basis of free-cash-flow growth and margins, I expect this stock will be at $50 by the end of the year.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a co-founder of where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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