PSTG: Is Pure Storage Stock a Buy Under $27?

Pure Storage Group (PSTG) simplifies data storage, by providing a cloud experience that enables any business to get the most out of their data while lowering the complexity and cost of managing the infrastructure that supports it.

The company’s shares have gained 40.6% over the past year and 3.9% over the past month to close yesterday’s trading session at $26.61.

In the first quarter of fiscal 2023, the company announced new collaborations with Snowflake and Kyndryl and an expanded partnership with Amazon Web Services (AWS) to provide global organizations with the knowledge, mission-critical capabilities, and enablement programs.

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

Positive Development

This month, PSTG introduced the FlashBlade/S product line, which has a revolutionary modular architecture built on co-designed hardware and software.

The new platform has a nearly infinitely scalable metadata design, providing more than twice earlier generations’ density, performance, and power efficiency. The platform changes over time in response to client needs.

Also, this month, PSTG reinforced its commitment to providing simple, dependable, and scalable storage with the launch of Evergreen/Flex, a new fleet-level Evergreen architecture that extends the capabilities of Pure’s Evergreen™ technology throughout the entire Pure portfolio.

2024 STOCK MARKET OUTLOOK

Evergreen/Flex delivers unparalleled storage efficiency and expands Pure’s range of Evergreen-based subscription services by freeing and transferring stranded storage capacity to where it is most required.

Improving Financials

During the first quarter ended May 08, 2022, PSTG’s total revenue increased 50.3% year-over-year to $620.41 million. Its loss from operations declined 94% year-over-year to $4.57 million.

The company’s net loss narrowed 247.2% from the year-ago value to $11.54 million, while its loss per share decreased 86.7% from the prior-year quarter to $0.04.

In addition, its net cash from operating activities grew 926.4% year-over-year to $220.13 million.

Impressive Growth Prospects

Street expects PSTG’s revenues and EPS to rise 21.2% and 22.1% year-over-year to $2.64 billion and $0.94, respectively, in fiscal 2023.

In addition, PSTG’s EPS is expected to rise at an 89.7% CAGR over the next five years.

Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in all of the trailing four quarters.

Consensus Rating and Price Target Indicate Potential Upside

Of the 10 Wall Street analysts that rated PSTG, seven rated it Buy, and three rated it Hold. The 12-month median price target of $38.00 indicates a 42.8% potential upside.

The price targets range from a low of $27.00 to a high of $50.00.

POWR Ratings Reflect Solid Prospects

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

Our proprietary rating system also evaluates each stock based on eight different categories. PSTG has an A grade for Growth and a B for Quality. Its solid earnings and revenue growth potential is consistent with the Quality and Growth grade.

PSTG is in the A-rated Technology – Storage industry.

Beyond what I stated above, we have graded PSTG for Sentiment, Value, Stability, and Momentum. Get all PSTG ratings here.

Bottom Line

PSTG has exhibited robust financial performance in the last quarterly release and is on track to deliver solid growth in the coming months based on various strategic advancements to boost its operational performance.

In addition, given the favorable analysts’ ratings and impressive growth attributes, we think the stock could be a great bet now.

PSTG shares closed at $26.07 on Friday, down $-0.54 (-2.03%). Year-to-date, PSTG has declined -19.91%, versus a -17.67% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...