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Here's Why You Should Buy Pure Storage (PSTG) Stock Now

Zacks Equity Research

Pure Storage PSTG is benefiting from adoption of its strong product portfolio including the likes of FlashArray and FlashBlade. Additionally, the company’s data platform for cloud is gaining traction.

In fact, the company introduced cloud-based services last month in a bid to provide a hybrid storage architecture, which eliminates the rigidity of choosing either on-premise or cloud infrastructure.

Pure Storage, Inc. Price and Consensus

Pure Storage, Inc. Price and Consensus | Pure Storage, Inc. Quote

Strategic Initiatives Favoring Growth Prospects

Transition to Cloud-Capable Storage Holds Promise

Pure Storage’s recent buyout of StorReduce is enabling the company to provide enterprises with purpose-built backup appliances (PBBA). Further, management remains elated about gaining StorReduce’s de-duplication technology. StorReduce is aimed at providing backup and accelerating the analytics processes for the data warehouses.

The StorReduce acquisition is expected to strengthen the company’s object storage portfolio and bolster the public cloud integrations as well. The company also expects to better manage unstructured data across multi-cloud environments with this buyout.

The newly-launched Pure Storage Cloud Data Services will run on industry-leading cloud platform of Amazon’s AMZN Amazon Web Services (“AWS”). The latest Pure Storage Cloud Data enables customers to bring storage software directly to cloud platforms.

With the new suite of services, the company attempts to empower customers with flexibility in the data-driven era in which, enterprise application mobility is vital. Moreover, the cloud data services users can leverage the company’s robust storage capabilities including multi-zone replication, data reduction and snapshots.

Notably, per ResearchAndMarkets data, the global data center storage market is envisioned to witness a CAGR of 11.8% from 2018 through 2022. We believe the transition to cloud-capable storage for data integrity and predictive analytics bodes well for Pure Storage.

Expanding Customer Base: Key Catalyst

Strong product portfolio including the likes of FlashArray, FlashStack and FlashBlade business segments contribute to Pure Storage’s top line.

In the recently reported third-quarter results, the company added more than 300 new customers, bringing the total base to 5,450 organizations.

Moreover, management remains upbeat about strong growth seen in Global 2000, big government organizations and healthcare companies besides leading 1000 cloud vendors.

Bullish Q3, FY19 Outlook Raised

The company reported fiscal third-quarter 2019 non-GAAP earnings of 13 cents per share, comparing favorably with the Zacks Consensus Estimate of 9 cents.
 
Total revenues surged 34% from the year-ago quarter to $372.8 million and came ahead of the Zacks Consensus Estimate of $367 million. Revenues also outpaced management’s guided range of $361-$369 million.

For fiscal 2019, management lifted anticipated revenue range from the initial band of $1.35-$1.38 billion to $1.376-$1.384 billion. The Zacks Consensus Estimate for revenues is pegged at $1.38 billion, representing year-over-year growth of almost 35%.

Encouraging Earnings Surprise History & Estimate Revisions

Pure Storage displays a stellar earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four reported quarters, registering an average earnings surprise of 72.96%. The company has an expected long-term EPS growth rate of 17.5%.

Over the last 60 days, fiscal 2019 estimates have been revised 23.8% upward, driving the Zacks Consensus Estimate to 26 cents. The figure reflects a whopping year-over-year rise of 300%.

Other Factors

Pure Storage’s notable collaborations with Cisco CSCO and NVIDIA NVDA among others position the company’s portfolio well and aid it to expand business.

Cisco’s tie-up with the company’s FlashStack has significantly accelerated overall converged infrastructure and integrated systems markets. The company strengthened its partnership with NVIDIA, a dominant player in AI related computation to widen its product menu. The company has released AI-ready infrastructure or AIRI in collaboration with NVIDIA.

In light of the aforementioned factors, we believe, the odds in favor of an upside in the near term are high for this Zacks Rank #2 (Buy) stock. Pure Storage’s robust business fundamentals and strong go-to-market strategies deserve a special mention in this regard.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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