On Tuesday, Evercore ISI updated its outlook on Pure Storage (NYSE:PSTG), increasing the stock price target to $60 from $54, while maintaining an Outperform rating. The firm highlighted the company's year-to-date performance, noting a 46% increase in stock value compared to the S&P 500's 10% rise.
The emphasis was on Pure Storage's resilience amidst the transition to its Evergreen//One model and its distinct advantages in A.I. centric deployments.
According to Evercore ISI, Pure Storage is poised to continue outpacing the market and its competitors, supported by four primary factors. First, the Evergreen//One model is expected to generate increasing recurring revenue, with sales projected to reach $600 million in FY25 and sustain a 30-50% compound annual growth rate thereafter.
Second, Pure Storage's unique direct-to-flash architecture positions it favorably within the rapidly growing all-flash segment of the external enterprise storage market.
The firm also pointed out the potential in hyperscale opportunities through Pure Storage's //E family, which targets the $8-10 billion nearline and hybrid storage market. This move is intended to help Pure penetrate deeper into tiered storage within data centers.
Lastly, Evercore ISI sees potential for margin expansion, particularly in services and operating margins, which could lead to an earnings per share run-rate approaching or exceeding $3.00.
In conclusion, Evercore ISI believes that Pure Storage is well-positioned to sustain double-digit revenue growth in FY25 and beyond. The transition to a business model with more predictable and recurring revenue streams, along with investments in accessing colder storage tiers, could lead to further valuation expansion and unlock a total addressable market of approximately $58-59 billion.
The firm's adjusted price target reflects confidence in Pure Storage's strategic positioning and growth prospects.
InvestingPro Insights
As Pure Storage (NYSE:PSTG) continues to attract attention with its strategic positioning and growth prospects, insights from InvestingPro provide additional context for investors. With a market capitalization of $16.78 billion and a high price-to-earnings (P/E) ratio of 261.52, the company appears to be trading at a premium, reflecting investor optimism about its future earnings potential.
Notably, Pure Storage's revenue growth over the last twelve months was a modest 2.8%, indicating a stable but not rapid increase in sales.
InvestingPro Tips highlight that Pure Storage is expected to become profitable this year, with 9 analysts revising their earnings estimates upwards for the upcoming period. The company's strong performance is also evidenced by a significant return of 104.08% over the last year. Moreover, it is worth noting that Pure Storage holds more cash than debt, providing a solid financial foundation for future growth.
For investors looking to delve deeper into Pure Storage's financial health and future prospects, there are 14 additional InvestingPro Tips available. These can offer more nuanced guidance on the company's valuation multiples and profitability outlook. Interested investors can take advantage of a special offer using the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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