Why You Should Hold on to Pure Storage (PSTG) Stock for Now
Shares of @Pure Storage Inc. #PSTG have been performing well of late. If you haven’t taken advantage of the share price appreciation yet, its time you hold the stock in your portfolio as it looks promising and is poised to carry the momentum ahead. Shares of Pure Storage, which provides software-defined all-flash solutions that are uniquely fast and cloud-capable for customers, have returned 40.7% in a year, substantially outperforming the industry ‘s growth of 20.9%. What’s Going in Favor of Pure Storage? Pure Storage is rapidly gaining traction in the flash storage market, as evident from its expanding customer base. In the third quarter, the company added more than 300 customers, bringing the total base to 4,000 organizations and reflecting an increase of 54% from the year-ago quarter. Notably, the company’s cloud customers contributed around 25% to business while existing customers contributed 70%. The company’s strong product portfolio with the likes of FlashArray and FlashBlade business segments was the key catalyst. Additionally, its data platform for cloud is gaining traction. Management is optimistic about its scalable storage solutions in an era where the world is typically being driven by big-data, artificial intelligence (AI) and data analytics based information. The company is currently focusing on three major aspects, namely increasing cloud customer base, solidifying the position of its next generation workload related core data infrastructure and tapping large enterprises as they “cloudify” their on-premise IT infrastructure. Management is also positive about the company’s partner ecosystem, which assisted it in winning a multimillion dollar deal with a prominent financial services institution. The company stated that the storage market for AI is likely to witness CAGR of 78% over the next five years. Pure Storage is well poised to grab the opportunity. Further, its partnership with NVIDIA, which is a dominant player in AI related computation, is anticipated to be a positive. Notably, the company delivered a positive earnings surprise of 66.7% in the last quarter. Risks Prevail However, @Pure Storage faces intensifying competition in the flash-based storage market from the likes of @Hitachi, @NetApp, @Dell EMC, @Hewlett P Enterprise, @Lenovo and @IBM. The competition has resulted in a decline in the average selling price (“ASP”). Any decline in ASP will impact the results if shipments do not improve considerably. This will eventually hurt top-line growth going forward. Our Take We expect the aforementioned factors to help the company sustain its strong momentum and stay afloat in difficult times. Hence, we suggest that investors hold on to the stock at the moment. Zacks Rank & Key Picks Pure Storage carries a Zacks Rank #3 (Hold). NVIDIA Corporation NVDA , Western Digital Corporation WDC and Analog Devices, Inc. ADI are some better-ranked stocks in the same sector. All the three companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here . NVIDIA, Western Digital and Analog Devices have a long-term earnings growth rate of 10.3%, 25.1% and 10.4%, respectively.