Here's Why Investors Need to Keep an Eye on Pure Storage (PSTG)
Record Inflation, hawkish Fed policy, lingering supply chain issues and uncertainty prevailing over global macroeconomic conditions have raised investors’ apprehension. The abovementioned factors are taking a toll on major U.S. indices. Year to date, the S&P 500 has declined 17.5%.
Amid the ongoing volatility, Pure Storage PSTG is a stock that investors may consider adding to their portfolio to make some gains from its upside potential.
The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Apart from having solid fundamentals, Pure Storage has the favorable combination of a Growth Score of A and a Zacks Rank #2. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or #2 and a Growth Score of A or B offer solid investment opportunities.
Pure Storage has an impressive earnings surprise history. The company outpaced estimates in all the trailing four quarters, delivering an average earnings surprise of 171.8%. The stock has an impressive long-term earnings per share growth expectation of 35.5%.
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The stock has lost 5.4% in the past year against the industry’s decline of 24.1%. It is still trading 16.2% below its 52-week high of $36.71 on Mar 28, making it relatively affordable for investors.
The Zacks Consensus Estimate for fiscal 2023 earnings of $1.18 per share suggests growth of approximately 63.9% from the year-ago period’s levels. It has remained unchanged in the past 30 days.
For fiscal 2024, the consensus mark for earnings is pegged at $1.34, indicating a year-over-year increase of 13.1%.
For fiscal 2023 and 2024, the company’s revenue estimates are pegged at $2.75 billion and $3.17 billion, suggesting year-over-year growth of 26.2% and 15.2%, respectively.
Factors Driving Growth
Pure Storage is gaining from momentum in product and subscription services and revenue growth in the domestic and international segments. Subscription services’ revenues are benefiting from the robust adoption of Evergreen subscription services and synergies from the Portworx acquisition.
Pure Storage has been gaining from its growing clout of FlashArray, FlashArray//C, and FlashBlade, a cost-effective storage array solution. The solution provides customers with higher performance capabilities and enables them to run complex cloud workloads on a single platform.
A higher customer base (especially large enterprise clients) and strength in commercial business bode well. In the last reported quarter, Pure Storage added more than 350 customers. The company’s customer base includes 56% of Fortune 500 companies.
Driven by strong fiscal second-quarter results, the company raised its outlook for fiscal 2023. For fiscal 2023, Pure Storage expects revenues of $2.75 billion, indicating year-over-year growth of 26%. Pure Storage had previously expected revenues of $2.66 billion, indicating year-over-year growth of 22%.
Non-GAAP operating income is now expected to be $390 million and the non-GAAP operating margin is expected to be 14%. Previously, the non-GAAP operating income was expected to be $320 million and the non-GAAP operating margin was expected to be 12%.
Other Stocks to Consider
Some other top-ranked stocks from the broader technology space are Arista Networks ANET, Blackbaud BLKB and Jabil JBL. All stocks currently sport a Zacks Rank #1.
The Zacks Consensus Estimate for Arista Networks’ 2022 earnings is pegged at $4.33 per share, up 7.2% in the past 60 days. The long-term earnings growth rate is anticipated to be 17.5%.
Arista Networks’ earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 12.7%. Shares of ANET have decreased 10.6% in the past year.
The Zacks Consensus Estimate for Blackbaud’s 2022 earnings is pegged at $2.59 per share, up 1.6% in the past 60 days. The long-term earnings growth rate is anticipated to be 4%.
Blackbaud’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 4.9%. Shares of BLKB have declined 24.7% in the past year.
The Zacks Consensus Estimate for Jabil’s fiscal 2023 earnings is pegged at $8.18 per share, rising 3.8% in the past 60 days. The long-term earnings growth rate is anticipated to be 12%.
Jabil’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 9.3%. Shares of JBL have decreased 6% in the past year.
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