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Pure Storage (PSTG) Surges 51% YTD: Will the Rally Continue?
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Pure Storage, Inc’s (PSTG - Free Report) shares have been performing well on the trading front, with a gain of 51.4% year to date compared with the S&P 500 composite’s growth 19.2%.
Headquartered in Mountain View, CA, Pure Storage provides software-defined all-flash solutions that are uniquely fast and cloud-capable for customers. Its primary offerings are FlashArray and FlashBlade products, which include FlashArray//C, FlashArray//XL, FlashArray File Services, FlashBlade//S and FlashBlade//E. The company offers its products and services on a subscription basis through Evergreen//One and Cloud Data Services. Its software offering includes Pure1, Pure Fusion and Portworx.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at present.
Apart from a favorable rank, PSTG has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
Image Source: Zacks Investment Research
The stock is down 21.5% from its 52-week high level of $70.41, reflecting further potential upside.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 25%.
The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues is pegged at $3.13 billion and $3.56 billion, respectively, indicating growth of 10.6% and 13.6% from the year-ago levels.
The consensus estimate for fiscal 2025 and 2026 EPS is pegged at $1.64 and $1.94, respectively, indicating a rise of 15.5% and 18.6% from the prior-year actuals.
Growth Catalysts
Pure Storage’s FlashBlade platform remains its primary growth driver. Strong uptake of the latest FlashBlade//E solution bodes well. FlashBlade//E is an unstructured data repository solution for large-capacity data stores. Customers can also deploy this latest solution through a new service tier of PSTG's Evergreen//One Storage as-a-Service subscription.
Expansion of the Evergreen portfolio and higher subscription revenues are other growth catalysts. In the last reported quarter, Subscription services revenues (49.9% of total quarterly revenues) of $346.1 million rose 23.5% on a year-over-year basis.
Higher sales to new and existing enterprise customers across the data storage platform is another tailwind. In the first quarter of fiscal 2025, PSTG added more than 262 new customers. At the end of the last reported quarter, the company’s customer count was more than 12,000, including 61% of the Fortune 500 companies.
Moreover, management noted that rapid advances in AI technology are opening up several market opportunities for Pure Storage in various market segments like the high-performance data storage market for large public or “private GPU farms”. The other market opportunities include increasing demand for specialized storage for enterprise Inference engines environments, along with a requirement to upgrade all enterprise storage to perform as a storage cloud environment.
To capitalize on the AI opportunity, PSTG made a strategic investment in visual AI tech company, LandingAI. The investment is aimed at boosting the advancement of AI vision models.
Sound Capital Allocation Strategy
Pure Storage has a strong balance sheet with ample liquidity position. It exited the fiscal first quarter that ended May 5, 2024, with cash, cash equivalents and marketable securities of $1.7 billion. The company had a long-term debt of $0.1 million as of May 5.
Cash flow from operations amounted to $221.5 million in the fiscal first quarter compared with $173.3 million in the prior-year quarter. Free cash flow was $172.7 million compared with $121.8 million in the prior-year quarter. Robust liquidity and cash flow reflect that the company is making investments in the right direction.
Robust Outlook
Going ahead, management expects strengthening demand trends to drive its top-line growth. Revenues for fiscal 2025 are anticipated to be $3.1 billion, which indicates a 10.5% rise from fiscal 2024.
Total contract value (TCV) sales for Evergreen//One & Evergreen//Flex subscription service offerings are forecasted to be $600 million for fiscal 2025, which implies 50% growth from a year ago. TCV sales for Evergreen//One and Evergreen//Flex exceeded $400 million in fiscal 2024.
For the second quarter fiscal 2025, Pure Storage expects revenues to be $755 million, representing an increase of 9.6% from a year ago.
The non-GAAP operating income for the fiscal second quarter is expected at $125 million. The non-GAAP operating margin is expected at 16.6%.
Headwinds Persist
Management remains concerned about the volatile macroeconomic backdrop. Price increases on NAND from suppliers might affect margins. Intensified competition in the flash-based storage market remains an additional headwind.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 3% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 18.7% in the past year.
The Zacks Consensus Estimate for ANET’s 2024 earnings is pegged at $8.24, unchanged in the seven days. ANET’s earnings beat the Zacks Consensus Estimate in each of the last four quarters with the average surprise being 15%. The long-term earnings growth rate is 17.2%. Its shares have risen 88.5% in the past year.
The Zacks Consensus Estimate for SAP’s 2024 EPS is pegged at $4.75. SAP’s earnings beat the Zacks Consensus Estimate in two of the last four quarters and missed the same in the other two, the average surprise being 4%. The long-term earnings growth rate is 10.7%. The stock has surged 52.2% in the past year.
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Pure Storage (PSTG) Surges 51% YTD: Will the Rally Continue?
Pure Storage, Inc’s (PSTG - Free Report) shares have been performing well on the trading front, with a gain of 51.4% year to date compared with the S&P 500 composite’s growth 19.2%.
Headquartered in Mountain View, CA, Pure Storage provides software-defined all-flash solutions that are uniquely fast and cloud-capable for customers. Its primary offerings are FlashArray and FlashBlade products, which include FlashArray//C, FlashArray//XL, FlashArray File Services, FlashBlade//S and FlashBlade//E. The company offers its products and services on a subscription basis through Evergreen//One and Cloud Data Services. Its software offering includes Pure1, Pure Fusion and Portworx.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at present.
Apart from a favorable rank, PSTG has a Growth Score of A. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a Growth Score of A or B offer solid investment opportunities.
Image Source: Zacks Investment Research
The stock is down 21.5% from its 52-week high level of $70.41, reflecting further potential upside.
The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 25%.
The Zacks Consensus Estimate for fiscal 2025 and 2026 revenues is pegged at $3.13 billion and $3.56 billion, respectively, indicating growth of 10.6% and 13.6% from the year-ago levels.
The consensus estimate for fiscal 2025 and 2026 EPS is pegged at $1.64 and $1.94, respectively, indicating a rise of 15.5% and 18.6% from the prior-year actuals.
Growth Catalysts
Pure Storage’s FlashBlade platform remains its primary growth driver. Strong uptake of the latest FlashBlade//E solution bodes well. FlashBlade//E is an unstructured data repository solution for large-capacity data stores. Customers can also deploy this latest solution through a new service tier of PSTG's Evergreen//One Storage as-a-Service subscription.
Expansion of the Evergreen portfolio and higher subscription revenues are other growth catalysts. In the last reported quarter, Subscription services revenues (49.9% of total quarterly revenues) of $346.1 million rose 23.5% on a year-over-year basis.
Higher sales to new and existing enterprise customers across the data storage platform is another tailwind. In the first quarter of fiscal 2025, PSTG added more than 262 new customers. At the end of the last reported quarter, the company’s customer count was more than 12,000, including 61% of the Fortune 500 companies.
Moreover, management noted that rapid advances in AI technology are opening up several market opportunities for Pure Storage in various market segments like the high-performance data storage market for large public or “private GPU farms”. The other market opportunities include increasing demand for specialized storage for enterprise Inference engines environments, along with a requirement to upgrade all enterprise storage to perform as a storage cloud environment.
To capitalize on the AI opportunity, PSTG made a strategic investment in visual AI tech company, LandingAI. The investment is aimed at boosting the advancement of AI vision models.
Sound Capital Allocation Strategy
Pure Storage has a strong balance sheet with ample liquidity position. It exited the fiscal first quarter that ended May 5, 2024, with cash, cash equivalents and marketable securities of $1.7 billion. The company had a long-term debt of $0.1 million as of May 5.
Cash flow from operations amounted to $221.5 million in the fiscal first quarter compared with $173.3 million in the prior-year quarter. Free cash flow was $172.7 million compared with $121.8 million in the prior-year quarter. Robust liquidity and cash flow reflect that the company is making investments in the right direction.
Robust Outlook
Going ahead, management expects strengthening demand trends to drive its top-line growth. Revenues for fiscal 2025 are anticipated to be $3.1 billion, which indicates a 10.5% rise from fiscal 2024.
Total contract value (TCV) sales for Evergreen//One & Evergreen//Flex subscription service offerings are forecasted to be $600 million for fiscal 2025, which implies 50% growth from a year ago. TCV sales for Evergreen//One and Evergreen//Flex exceeded $400 million in fiscal 2024.
For the second quarter fiscal 2025, Pure Storage expects revenues to be $755 million, representing an increase of 9.6% from a year ago.
The non-GAAP operating income for the fiscal second quarter is expected at $125 million. The non-GAAP operating margin is expected at 16.6%.
Headwinds Persist
Management remains concerned about the volatile macroeconomic backdrop. Price increases on NAND from suppliers might affect margins. Intensified competition in the flash-based storage market remains an additional headwind.
Other Stocks to Consider
Other top-ranked stocks worth consideration in the broader technology space include Badger Meter (BMI - Free Report) , Arista Networks (ANET - Free Report) and SAP SE (SAP - Free Report) . Badger Meter and Arista Networks sport a Zacks Rank #1 each, while SAP carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Badger Meter’s 2024 EPS is pegged at $4.06, up 3% in the past 30 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.9%. The long-term earnings growth rate is 17.9%. Its shares have risen 18.7% in the past year.
The Zacks Consensus Estimate for ANET’s 2024 earnings is pegged at $8.24, unchanged in the seven days. ANET’s earnings beat the Zacks Consensus Estimate in each of the last four quarters with the average surprise being 15%. The long-term earnings growth rate is 17.2%. Its shares have risen 88.5% in the past year.
The Zacks Consensus Estimate for SAP’s 2024 EPS is pegged at $4.75. SAP’s earnings beat the Zacks Consensus Estimate in two of the last four quarters and missed the same in the other two, the average surprise being 4%. The long-term earnings growth rate is 10.7%. The stock has surged 52.2% in the past year.