Yahoo Finance Pure Storage (PSTG) Soars 137% in a Year: Will the Rally Last?
Pure Storage, Inc PSTG is continuing its upward trajectory, with a surge of 137.1% in the past year compared with the S&P 500 Composite’s 26.3% growth.
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.
Solid financial performance is driving the good run on the trading front. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters with average surprise of 38.6%
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment.
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.
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Growth Catalysts
Management expects strengthening demand trends to drive performance in the long run.
The company’s FlashBlade platform remains its major 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 (42% of total revenues) rose 24% year over year.
In fiscal 2024, PSTG clinched eight total service level agreements across its Evergreen portfolio.
Total contract value (TCV) sales for Evergreen//One and Evergreen//Flex exceeded $400 million in fiscal 2024. TCV sales for Evergreen//One & Evergreen//Flex subscription service offerings are forecast to be $600 million for fiscal 2025, implying 50% growth from a year ago.
An expanded customer base (especially large-enterprise clients) is aiding top-line growth. In the fourth quarter of fiscal 2024, the company acquired 349 customers including six new Fortune 500 customers. It serves more than 60% of the Fortune 500 companies.
Pure Storage expects revenues to be $680 million for first-quarter fiscal 2025, representing an increase of 15.4% from the year-ago reported figure. The non-GAAP operating income is envisioned to be $68 million. The non-GAAP operating margin is projected to be 10%.
Management expects fiscal 2025 revenues to be $3.1 billion, indicating a rise of 10.5% from the year-earlier levels. The non-GAAP operating margin is suggested to be 17%.
Healthy Capital Allocation Strategy
PSTG has a strong balance sheet with ample liquidity position. It exited the fiscal fourth quarter that ended Feb 4, 2024, with cash, cash equivalents and marketable securities of $1.5 billion. The company had a long-term debt of $0.1 million as of Feb 4, 2024.
For the fiscal fourth quarter, cash flow from operations amounted to $244.4 million compared with $158.4 million in the prior-year quarter. Free cash flow was $200.9 million compared with $113.3 million a year ago.
Robust liquidity and cash flow reflect that the company is making investments in the right direction. In the fiscal fourth quarter, the company returned $21.4 million to shareholders by repurchasing 0.6 million shares. In fiscal 2024, it returned $135.7 million to shareholders by repurchasing 4.7 million shares.
It has $145 million left from its previously announced $250 million share repurchase plan. It also announced a new buyback authorization worth $250 million.
Estimate Revision Activity
PSTG’s fiscal 2025 and 2026 revenues are anticipated to rise 10.5% and 13.2% from the year- ago levels to $3.13 billion and $3.54 billion, respectively.
The company’s earnings per share (EPS) are expected to climb 9.2% and 18.7% from the prior-year actuals to $1.55 and $1.84 in fiscal 2025 and 2026, respectively.
The Zacks Consensus Estimate for fiscal 2025 and 2026 EPS has remained unchanged in the last 30 days.
A Few Headwinds
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
Some other top-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Salesforce CRM and The Descartes Systems Group Inc DSGX. While BMI sports a Zacks Rank #1, CRM and DSGX carry a Zacks Rank of 2 each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BMI’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 39.6% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 EPS is pegged at $9.71. The long-term earnings growth rate is 17.4%. Salesforce’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 5.1%. Shares of CRM have risen 33.5% in the past year.
The Zacks Consensus Estimate for Descartes’ fiscal 2025 EPS has increased 1.2% in the past 60 days to $1.69. Descartes earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have risen 25.6% in the past year.
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