NEW YORK (TheStreet) -- NetApp's (NTAP) - Get Report upside momentum in revenue and EPS is expected to continue into the company's third-quarter, according to analysts ahead of its second-quarter earnings release.

NetApp is set to report its second-quarter earnings ended October after the market close.

Although BMO Capital Markets analyst Keith Bachman has generally maintained previous second-quarter earnings estimates, he foresees upside potential for the stock from the third quarter on owing to his expectation of large deals closing and increased revenue growth. Bachman has raised his fiscal-year 2011 earnings per share (EPS) estimate to $2.12 from $2, vs. the $2.05 consensus estimate, and fiscal year 2012 EPS estimate to $2.45 from $2.20, vs. the $2.27 consensus estimate. For the October quarter, Bachman projects NetApp EPS of 51 cents on revenue of $1.2 billion vs. EPS consensus estimate of 49 cents on revenue of $1.19 billion.

He believes that the storage and data management provider will be able to maintain operating margins of 18% or more through the mentioned fiscal periods given strong revenue growth. "With the market rewarding growth, we think the stock moves higher based on a good October quarter and solid outlook," Bachman wrote in an investor note. Bachman has reiterated his market perform rating for NetApp, while raising his price target to $60. "On a relative basis, NTAP is not that expensive and we have been too conservative in our valuation since our downgrade in early 2010," he explained.

Wall Street on average expects second-quarter EPS consensus of 49 cents on revenue of $1.19 billion vs. actual EPS of 37 cents on revenue of $910 million the same period last year.

Jefferies analyst William Choi has also increased his price target for NetApp, to $60 from $39, while reiterating a hold view on the stock. Like Bachman, he expects that strong revenue growth will allow the company to keep its operating margin above 18%, noting NetApp's strong product pipeline heading into the third quarter and new customer additions, particularly in the mid-market. Choi expects the company's second quarter to come in at or above the high-end of its guidance and increases his estimates for the quarter to EPS of 51 cents on revenue of $1.21 billion.

Choi anticipates third-quarter revenue guidance of 4% to 6% quarter over quarter, in line with the consensus expectation of 5% growth. "Our contacts are noting healthy deal activity right now, as storage projects are still a priority with relatively high ROI (return on investment)," Choi said in a client note. "In addition, NetApp continues to add new customer growth." Choi predicts fiscal year 2011 EPS of $2.11 on revenue of $5 billion and fiscal year 2012 EPS of $2.38 on revenue of $5.8 billion, representing annual revenue growth of 16%.

"We believe NTAP will continue on its current trajectory by growing faster than its peers and expanding operating margins at the same time," Gleacher analyst Brian Marshall said in an equity research report. He thinks the stock offers good exposure to enterprise storage demand -- "one of the few remaining secular growth markets today."

Marshall maintains a buy rating for the stock while increasing his price target to $65 from $50.

Shares of NetApp have added 3.4% to $54.49 in morning trading.

-- Written by Andrea Tse in New York.

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