Analyst Expects Pure Storage Stock to Rise as AI Gains Traction

Morgan Stanley's Meta Marshall raised their price target on Pure Storage (NYSE: PSTG) by 11.6% from $43 to $48 on 2024/02/29. The analyst maintained their Strong Buy rating on the stock.

Following an assessment of Pure Storage's fourth-quarter and fiscal year 2024 results, Marshall highlighted that the quarterly results were marginally better than anticipated. Moreover, the management's guidance was "not as bad as feared." Marshall predicts that Pure Storage's stock price will "move closer to its bull case as AI gains traction."

Pure Storage's fourth-quarter 2024 earnings per share (EPS) came in at $0.50, beating the Zacks Consensus Estimate of $0.45. However, it missed the previous year's fourth-quarter EPS of $0.53 by 5.7%. The company reported revenue of $789.81 million, surpassing the Zacks Consensus Estimate by 0.97%. Nevertheless, it fell short of the prior year's fourth-quarter revenue of $810.21 million by 3%. The company recorded an operating income of $157.8 million, with an operating margin of 20%.

For fiscal year 2024, Pure Storage achieved revenue of $2.8 billion, reflecting a 3% year-over-year increase. The company's operating income for the fiscal year was $458.4 million, with an operating margin of 16.2%.

Looking ahead, Pure Storage's management provided guidance for the first quarter of 2025, expecting revenue of $680 million, representing a growth rate of 15.4%. The company also projected an operating income of $68 million, with an operating margin of 10%. For the full fiscal year 2025, Pure Storage anticipates revenue of $3.1 billion, reflecting a growth rate of 10.5%. The company expects to achieve an operating income of $532 million, with an operating margin of 17%.

Commenting on Pure Storage's data platform strategy, Chairman and CEO Charles Giancarlo stated, "Our data platform strategy is revolutionizing the storage industry. It helps enterprises and service providers unify fragmented data environments into a seamless, modern, and efficient system—a system performance-ready for artificial intelligence." Giancarlo also emphasized the reliability, performance, and economic benefits of Flash storage.

CFO Kevan Krysler added, "We closed FY24 delivering strong RPO growth, and exceeded our revenue and operating margin guidance in Q4. Looking to FY25, we expect double-digit revenue growth and strong growth of RPO, fueled by our highly differentiated data storage platform, and strength of our Evergreen and Portworx consumption and subscription offerings."

In addition to Meta Marshall's rating, several other analysts also updated their views on Pure Storage on February 29, 2024. Stifel Nicolaus's Matthew Sheerin raised their price target by 12.2%, from $41 to $46, while maintaining a Hold rating on the stock. Bank of America's Wamsi Mohan increased their price target by 19%, from $42 to $50, and also maintained a Hold rating. UBS's David Vogt raised their price target by 15.8%, from $38 to $44, and similarly maintained a Hold rating.

Currently, 70% of top-rated analysts consider Pure Storage a Strong Buy or Buy, while 30% view it as a Hold. No analysts recommend or strongly recommend selling the stock.

Since Pure Storage's latest quarterly report on February 28, 2024, the stock price has risen by 32.3%. On a year-over-year basis, the stock has surged by 127.8%. During this period, Pure Storage has outperformed the S&P 500, which has seen a rise of 26.7%.

Meta Marshall, the analyst behind the recent rating, is ranked by WallStreetZen in the top 7% out of 4,485 Wall Street analysts. Marshall specializes in the Technology and Consumer Cyclical sectors, among others, and has an average return of 15.4% and a win rate of 61.6%.

Pure Storage, Inc., headquartered in Mountain View, CA, offers a range of storage products including capacity storage, NVME storage, entry-level storage, and file and object storage. The company's products are used by cloud-based software and service providers, as well as in various industries such as consumer web, education, energy, financial services, government, healthcare, manufacturing, media, retail, and telecommunications.

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