With an $8.65 billion market cap, Pure Storage, Inc. (PSTG) provides the most-advanced data storage technologies, products, and related services in the United States and internationally. The company’s Purity software offers enterprise-class data services and is shared across its products.

PSTG’s products portfolio includes FlashArray for block-oriented storage, addressing databases, virtual machines, and other traditional workloads; FlashBlade for unstructured data workloads of various types; FlashRecover, an all-flash modern data-protection solution; and AIRI, a full-stack AI-ready infrastructure.

The IT pioneer delivered continued growth and increasingly gained market share, driven by an expanding portfolio of industry-leading offerings recognized and embraced by various enterprises and consumers around the globe. In addition to substantial progress on its new products and services, the company delivered strong revenue growth and profitability in the second quarter.

In June, PSTG introduced the FlashBlade®//S family of products with a new modular architecture built on uniquely co-designed hardware and software to address unstructured data demands and modern application growth. The new platform leverages a nearly limited scalable metadata architecture and offers more than double density, performance, and power efficiency.

Also, in the same month, PSTG advanced a portfolio of Evergreen offerings, including the new fleet-level Evergreen//Flex, extending leadership in Storage-as-a-Service (STaaS). Evergreen//Flex enables unrivaled storage efficiency and grows the company’s portfolio of Evergreen-based subscription services.

On May 18, PSTG announced an expansion of the Portworx portfolio, boosting developer productivity. A series of updates to its Portworx portfolio includes the general availability of Portworx Data Services, the industry’s first Kubernetes Database-as-a-Service (DBaaS) Platform; Portworx Enterprise, the multi-cloud ready Kubernetes data management platform; and Portworx backup-as-a-Service, which supports backup of Kubernetes services.

PSTG’s shares have gained 12% in price over the past year and 4.7% over the past three months to close the last trading session at $29.22.

Here is what could influence PSTG’s performance in the upcoming months:

Robust Financials

For the fiscal 2023 second quarter ended August 7, 2022, PSTG’s revenue increased 30.8% year-over-year to $646.77 million, and its gross profit came in at $443.57 million, up 30.5% year-over-year. The company’s income from operations amounted to $14.36 million, compared to a $33.93 loss in the prior-year quarter.

Furthermore, the company’s net income and income per share attributable to common stockholders came in at $10.92 million and $0.03, registering increases of 124.1% and 118.8% from the prior-year period, respectively. Also, cash inflows from operating activities improved 29.2% from the year-ago value to $159.38 million.

Favorable Analyst Estimates

Analysts expect PSTG’s revenue for the fiscal 2023 third quarter (ending October 2022) to come in at $672.12 million, indicating an increase of 19.4% from the same period in 2021. The $0.25 consensus EPS estimate for the current quarter indicates a 15.7% year-over-year increase. It’s no surprise that the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, PSTG’s revenue and EPS for its fiscal year 2023 (ending January 2023) are expected to rise 26.2% and 76.4% year-over-year, respectively. Also, analysts expect the company’s revenue and EPS for the next year to grow 15.1% and 12.8% year-over-year, respectively.

High Profitability

PSTG’s trailing-12-month gross profit margin of 67.78% is 35.7% higher than the 49.94% industry average. Its trailing-12-month levered FCF margin of 16.67% is 110% higher than the 7.94% industry average. Likewise, the stock’s trailing-12-month CAPEX/Sales of 4.13% is 69.7% higher than the industry average of 2.43%.

Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.87% is 37.1% higher than the 0.63% industry average.

Consensus Rating and Price Target Indicate Upside

Of the 14 Wall Street analysts that rated PSTG, 11 rated it Buy, while three rated it Hold. The 12-month median price target of $39.50 indicates a 35.2% potential upside. The price targets range from a low of $33.00 to a high of $47.00.

POWR Ratings Show Promise

PSTG’s overall B rating equates to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

PSTG has a grade A for Growth, consistent with its revenue and earnings growth estimates. In addition, the stock has a grade of A for Quality, in sync with its higher-than-industry profitability multiples.

PSTG is ranked first in the A-rated Technology-Storage industry.

Beyond what I have stated above, we have also given PSTG grades for Sentiment, Value, Stability, and Momentum. Get access to all PSTG ratings here.

Bottom Line

PSTG reported impressive fiscal 2022 second-quarter results. Moreover, a higher customer base (majorly large enterprises) and strength in commercial business bode well for the company. In the last quarter, PSTG added more than 350 customers. The business momentum, combined with the expansion of its industry-leading products and services portfolio, is expected to foster solid growth in the upcoming quarters.

Given the PSTG’s robust financials, higher-than-industry profitability, and solid revenue and earnings growth estimates, we think it could be wise to invest in the stock now.

PSTG shares rose $0.03 (+0.10%) in premarket trading Thursday. Year-to-date, PSTG has declined -10.23%, versus a -15.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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