Pure Storage: Building Momentum And Partnerships Ahead Of Q2 2024 Financial Result (PSTG)

Initially of this yr, I wrote an article specializing in Pure Storage, Inc. (NYSE:PSTG) and its strategic positioning inside the data-driven panorama. The corporate has constantly exceeded EPS expectations for the previous sixteen quarters and is about to launch its Q2 2024 monetary outcomes on August 30. As a leading figure in flash storage expertise, Pure Storage has gained momentum, attaining robust Q1 2024 outcomes and delivering a 31.45% year-to-date return for traders, whereas sustaining a low quick curiosity of two.50%.

Regardless of the numerous inventory momentum, Pure Storage nonetheless possesses untapped development potential forward of earnings and for the complete monetary yr because of the launch of current improvements, a considerable improve in enterprise prospects, a transparent aggressive benefit over outdated applied sciences and administration have maintained the FY2024 steering. Though cautious of ongoing macroeconomic headwinds, I preserve a long-term bullish stance on this inventory forward of its upcoming earnings launch.

Compelling storage firm

In my earlier article, I gave an outline of Pure Storage, which delivers an more and more necessary service in our data-driven world. Environment friendly knowledge storage is extra important than ever, and Pure Storage stands out for its high-performing options that surpass older arduous disk methods. Within the earlier quarter, we noticed the corporate onboard 276 prospects, introduce improvements and increase current options. Options have clear aggressive benefits over older technological options, which may give us confidence within the firm’s potential to proceed to develop its high and bottom-line fundamentals.

The corporate has constantly demonstrated monetary energy, as evidenced by exceeding EPS and income expectations in Q1 2024 regardless of headwinds within the IT trade. Pure Storage has additionally launched revolutionary merchandise corresponding to Evergreen-One and FlashBlade-E which can be in excessive demand. The corporate’s give attention to AI infrastructure and a cloud working mannequin additional enhances its aggressive edge, offering prospects with competitively priced and high-performance options. Pure Storage has additionally fashioned important partnerships, together with a current long-term settlement with Microsoft (MSFT) to supply storage capabilities.

As a leader in Storage recognised by Gartner, Pure Storage attracts from its complete platform, trendy strategy, and storage-as-a-service pricing mannequin to draw prospects. The recognition of flash storage has dramatically diminished the demand for arduous disk drives (HDDs). It’s predicted that by 2028, there can be no additional HDD gross sales.

When evaluating Pure Storage to different corporations within the storage trade, corresponding to Dell Applied sciences (DELL), Worldwide Enterprise Machines (IBM), Hewlett Packard (HPE), NetApp (NTAP), and Hitachi (OTCPK:HTHIY), it’s evident that Pure Storage has been gaining market share over the previous 9 years whereas the bigger performs have misplaced momentum.

This firm has a projected EPS development charge of 15.2%, which is larger than the trade’s charge of 13.8%. This reveals that the corporate has robust potential for efficiency within the long-term. Moreover, the corporate usually buys again its personal shares. In Q1, it invested $70 million to repurchase 2.9 million shares, demonstrating its dedication to its shareholders.

Upcoming Earnings

Pure Storage has exceeded EPS expectations for the previous sixteen consecutive quarters. The normalised EPS for the upcoming quarter is estimated to be $0.28, with income reaching $681.70 million. The administration staff has set a medium to excessive development goal for FY 2024, which they confirmed within the first quarter of this yr.

The corporate has constantly improved its annual EPS outcomes previously 5 monetary years, with consecutive development over the past three years.

Valuation

The inventory has seen a current improve in worth, however it nonetheless presents potential for additional development and stays priced under its common goal of $41.03. I’ve in contrast Pure Storage to different storage corporations corresponding to Dell Applied sciences, Worldwide Enterprise Machines, Hewlett Packard, NetApp, and Hitachi, utilizing the Searching for Alpha Quant Issue Grades system for a relative evaluation. Pure Storage’s excessive price-to-earnings ratio suggests it could be overvalued, however its sooner development charge than its friends makes comparisons difficult. Nonetheless, if we take into account development and give attention to the FWD PEG, Pure Storage seems to be an thrilling selection with a ratio of 1.61, which is decrease than a number of of its friends.

Pure Storage is the one firm to realize a double-digit year-over-year income development together with a notable improve in EBITDA. Sustaining this exceptional momentum is essential for the corporate’s ongoing success.

Dangers

Whereas Pure Storage has proven spectacular high and bottom-line development, traders needs to be cautious that macroeconomic uncertainties may impression future demand and decelerate gross sales cycles, affecting its efficiency. Moreover, the corporate depends on the success of revolutionary options, which have created a lot curiosity, however there could also be a threat if preliminary curiosity doesn’t relay into predicted gross sales. Moreover, the corporate’s position in important consumer options for world enterprises raises the stakes, as technical glitches, knowledge breaches, and regulatory complexities pose dangers. Evolving knowledge storage dynamics require fixed innovation to remain aggressive. Whereas onboarding prospects, vulnerabilities within the provide chain pose dangers, doubtlessly impacting monetary operations and buyer satisfaction.

Remaining ideas

Pure Storage has achieved spectacular monetary leads to current quarters, driving its inventory efficiency to new heights this yr. As we strategy the Q2 2024 earnings launch, it is notable that administration is assured about each near-term and long-term development. The corporate has onboarded many new prospects, and the corporate’s direct-to-flash expertise is well-positioned to answer the rising want for environment friendly knowledge storage. Moreover, the enterprise mannequin has enticing gross revenue margins and long-term income insights. Whereas there may be some warning about how unsure macroeconomic circumstances may impression gross sales cycles, there may be clear curiosity within the answer from giant enterprise organisations, such because the current partnership with Microsoft. Due to this fact, I preserve a long-term bullish stance.