Pure Storage, Inc PSTG continues its meteoric rise, catapulting an astonishing 108.1% over the past year, leaving the S&P 500 Composite’s 30.4% growth in its dust.
Nestled in the heart of Mountain View, CA, Pure Storage is a purveyor of software-defined all-flash solutions that are the Usain Bolts of the tech world – blazingly fast and unapologetically cloud-ready. FlashArray and FlashBlade products make up the core offerings, donning names like FlashArray//C, FlashArray//XL, FlashArray File Services, FlashBlade//S, and FlashBlade//E.
Operating on a subscription basis through Evergreen//One and Cloud Data Services, the company spoils its clientele with a smorgasbord of software delights – Pure1, Pure Fusion, and Portworx.
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Despite a 13.4% dip from its 52-week zenith of $58.46, PSTG remains a tantalizing prospect for investors looking to ride the wave of technological ascension.
Forecasts paint a rosy picture for PSTG, with anticipated revenue spikes of 10.5% in fiscal 2025 and a dizzying 14% jump in fiscal 2026, ringing in at $3.13 billion and $3.57 billion, respectively.
Anticipated EPS growth for the company is equally impressive, with expected hikes of 9.2% and 18.7% in fiscal 2025 and 2026, landing at $1.55 and $1.84, respectively.
Market watchers have cranked up their magnifying glasses, with the Zacks Consensus Estimate for fiscal 2025 and 2026 EPS inching up by 1.3% and 8.2%, a tangible reflection of their bullish sentiments.
With a long-term earnings growth rate of 17.6%, PSTG boasts an impeccable earnings track record, triumphing in each of the last four quarters with an average surprise of 38.6%.
The Engine of Growth
At the helm of PSTG’s growth trajectory is its FlashBlade platform, a veritable engine firing on all cylinders. Recently crossing the $2 billion revenue mark since its inception, the FlashBlade platform showcases enduring strength and unwavering appeal.
The latest addition to the FlashBlade family, FlashBlade//E, has been turning heads with its unstructured data repository capabilities for mammoth data stores. Leveraging PSTG’s Evergreen//One Storage as-a-Service subscription, this latest solution opens new doors for customers seeking top-tier data solutions.
Expansion of the Evergreen portfolio and an upsurge in subscription services revenues serve as the additional fuel propelling PSTG’s growth voyage. Subscription services revenues, accounting for 42% of total revenues, surged 24% year over year in the previous quarter.
Reaching for the stars, total contract value (TCV) sales for Evergreen//One and Evergreen//Flex are poised to hit a staggering $600 million in fiscal 2025, marking a jaw-dropping 50% growth from the previous year. The preceding fiscal year saw PSTG sealing the deal on eight service level agreements in its Evergreen portfolio.
With an expanding clientele, particularly in the realm of large-enterprise customers, PSTG’s top-line trajectory remains on an upward incline. A recent acquisition spree in the fourth quarter of fiscal 2024 welcomed 349 customers into the PSTG fold, including six Fortune 500 stalwarts. The company now counts more than 60% of Fortune 500 companies as its esteemed clients.
Financial Fortitude
With a robust balance sheet boasting ample liquidity reserves, Pure Storage paints a picture of financial health that would make a miser crack a smile. Exiting the fiscal fourth quarter, PSTG flaunted cash, cash equivalents, and marketable securities worth a cool $1.5 billion. By comparison, its long-term debt languished at a mere $0.1 million as of February 4, 2024.
The cash cow doesn’t stop there. Cash flow from operations in the fiscal fourth quarter surged to $244.4 million, a marked improvement from $158.4 million in the corresponding period of the prior year. Free cash flow danced gracefully to the tune of $200.9 million, up from $113.3 million in the previous year’s comparable quarter.
Empowered by a well-endowed war chest, PSTG wields its financial prowess to deliver shareholder value through a robust shareholder return program. In the fiscal fourth quarter alone, the company extended $21.4 million in shareholder payouts by repurchasing 0.6 million shares. The splurge continued through fiscal 2024, with a total of $135.7 million returned to shareholders through the repurchase of 4.7 million shares.
Not content with the status quo, Pure Storage still has $145 million left in its back pocket from a previously announced $250 million share buyback scheme. Additionally, a fresh $250 million buyback authorization adds a touch of extra spice to the mix.
Clouds in the Horizon
However, as with any growth story, Pure Storage doesn’t escape the looming shadows of potential headwinds. Management anticipates a return to double-digit revenue growth in fiscal 2025, an exhilarating uptick of 10.1% to $3.1 billion. Yet, a cautious eye remains on the macro spending landscape, teetering on the edge of uncertainty.
Pressures from suppliers with price hikes on NAND could cast a shadow on margins, injecting an element of caution into the equation. Furthermore, stiff competition in the flash-based storage arena adds further complexity to the equation for this Zacks Rank #3 (Hold) stock.
Stocks to Keep an Eye On
In the vast expanse of the technology arena, a few stars twinkle brighter than most – Manhattan Associates (MANH), Adobe (ADBE), and Microsoft (MSFT). Manhattan Associates proudly boasts a Zacks Rank #1 (Strong Buy), while Adobe and Microsoft stand tall with a Zacks Rank of 2 (Buy) each.
Manhattan Associates shines with a 27.6% average surprise in earnings, with the Zacks Consensus Estimate for MANH’s 2024 EPS scaling 3.6% higher in the past 60 days to $3.76. Not to be outdone, Adobe wields a solid 13% long-term earnings growth rate, while Microsoft dazzles with an 8.8% average earnings surprise in the past four quarters.
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Microsoft Corporation (MSFT) : Free Stock Analysis Report
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Pure Storage, Inc. (PSTG) : Free Stock Analysis Report
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