Pure Storage shares are down 5% year to date but have increased nearly 50% in the past 12 months.
Courtesy of Pure Storage
Pure Storage shares were trading sharply higher on Tuesday after Deutsche Bank analyst Sidney Ho lifted his rating on the flash memory-based enterprise storage systems company to Buy from Hold while repeating his $27 target price.
Ho wrote that the stock has become too cheap after a recent pullback, with the stock off 12% year to date through Monday’s close. He considers the selloff in Pure Storage (ticker: PSTG) shares to be unwarranted and noted that the slide compares with an average 15% gain year to date for other enterprise hardware companies. For example, Western Digital (WDC) and HP Inc. (HPQ) have risen 26% and 23% respectively year to date.
“In addition to valuation, our checks suggest positive momentum for both Pure and the overall storage environment as pent-up demand remains from calendar 2020,” he wrote. “Longer-term, we believe that Pure will remain a technology leader in the enterprise storage space and has lots of runway left … which we believe should support additional [market] share gains and double-digit revenue growth over the next couple of years.”
Ho continued, writing that “there appears to be real traction in the market for [the company’s] subscription-based storage model, which should be a positive long term for Pure and the enterprise storage industry.”
Pure Storage posted better-than-expected results for its fiscal fourth quarter ended Feb. 2. For its quarter, Pure reported revenue of $502.7 million, up 2.2% from a year earlier and ahead of the Wall Street analyst consensus forecast of $480 million. Non-GAAP earnings were 23 cents a share, well above the Street consensus at 9 cents.
The company also resumed providing forward guidance after suspending the practice throughout 2020 due to uncertainly related to the Covid-19 pandemic. The company projected revenue for the 2022 fiscal year of $1.9 billion.
Following the earnings report, CEO Charlie Giancarlo told Barron’s the company expects to pick up starting in the July quarter when the economy reopens and IT spending is expected to increase.
Pure Storage shares on Tuesday have jumped more than 10% to $21.37.
Write to Eric J. Savitz at [email protected]
