IT pioneer Pure Storage, Inc. (PSTG) is known for delivering the world’s most advanced data storage technology and services. Charles Giancarlo, PSTG’s Chairman, and CEO said, “An ever growing number of customers around the world trust Pure to provide the most advanced, reliable, and energy-efficient technology to satisfy their mission-critical data storage and management needs.”

“With the power of our unique Flash-optimized technology and differentiated business model, we look forward to managing increasingly more of their data storage requirements,” Charles added.

Last week, the company announced the continued growth of its subscription service offerings, including its Evergreen® portfolio, in addition to a new energy efficiency service level agreement (SLA) for Evergreen//One™. The new SLA represents an industry-first energy efficiency guarantee in the enterprise storage as a service market and supports PSTG’s sustainability goals.

Also, on October 26, 2022, PSTG introduced a new fully managed service for Portworx® Enterprise to bring a Kubernetes-ready data plane to every developer that works on containerized applications. The full suite of Portworx offerings can now be consumed as a fully managed service by users of Amazon EKS, RedHat OpenShift, and any other Kubernetes services.

For the third quarter of fiscal 2023, PSTG’s Subscription Annual Recurring Revenue (ARR), supported by the Evergreen portfolio, Pure Cloud Block Store, and Portworx, reached $1 billion for the first time, up 30% year-over-year. Its Remaining Performance Obligations (RPO) were $1.60 billion, up 26% year-over-year.

Furthermore, the company raised its fiscal year 2023 non-GAAP operating income guidance. For the fiscal 2023 fourth quarter, the company’s non-GAAP operating income is expected to be approximately $130 million. For the full year, operating income is projected to arrive at nearly $430 million.

Shares of PSTG have gained 2.9% over the past month to $27.05. Moreover, Wall Street analysts expect the stock to hit $40.33 in the next 12 months, indicating a 49.1% upside potential.

Here is what could shape PSTG’s performance in the near term:

Solid Financials

In its fiscal 2023 third quarter ended November 6, 2022, PSTG’s total revenue of $676.05 million increased 20.1% year-over-year, with its Subscription Services revenue at $244.77 million, up 30.3% year-over-year. Its gross profit grew 24.4% from the year-ago value to $466.34 million. Cash inflows from operating activities came in at $154.70 million, up 21.8% year-over-year.

Furthermore, PSTG’s non-GAAP operating income was $107.20 million, up 54.4% year-over-year. Its non-GAAP net income rose 47.2% from the prior-year period to $98.09 million, while its non-GAAP net income per share stood at $0.31, up 40.9% year-over-year.

Favorable Analyst Estimates

Analysts expect PSTG’s revenue for the fiscal year (ending January 2023) to come in at $2.75 billion, indicating an increase of 26.3% year-over-year. Also, the company’s EPS for the current fiscal year is expected to grow 91.4% from the previous year to $1.27. Moreover, it has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

In addition, the consensus revenue estimate of $3.13 billion for the fiscal year (ending represents a 13.6% improvement year-over-year. The consensus EPS estimate of $1.30 for the same year indicates a 2.3% increase year-over-year.

Robust Profitability

PSTG’s trailing-12-month gross profit margin of 68.34% is 38% higher than the industry average of 49.53%, while its trailing-12-month levered FCF margin of 16.13% is 115% higher than the industry average of 7.50%. Likewise, the stock’s trailing-12-month CAPEX/Sales of 4.49% is 78.7% higher than the industry average of 2.51%.

POWR Ratings Reflect Promising Outlook

PSTG has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PSTG has an A grade for Growth, consistent with its robust financials and favorable analyst estimates. Also, the stock has a grade A for Quality, in sync with its higher-than-industry profitability.

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, Momentum, and Stability. Get access to all PSTG ratings here.

Bottom Line

Data storage solutions provider PSTG had an outstanding third quarter. Furthermore, the company raised its non-GAAP operating income guidance for fiscal 2023.

PSTG’s unique Flash-optimized technology and differentiated business model position it as the trusted provider for organizations. Given solid financials, promising growth prospects, and high profitability, we think investing your money in this stock could be wise this winter.

PSTG shares were unchanged in premarket trading Tuesday. Year-to-date, PSTG has gained 1.08%, versus a 4.29% 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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