Pure Storage: More Upside Potential?

Written by Larince Zhang

Pure Storage Inc. is an American technology company founded in 2009, which engages in developing all-flash data storage hardware and software products. Its technology has replaced traditional storage systems in the last few decades, namely mechanical disks, at the same time optimizing end-to-end for solid-state memory.

Fig.1: Reported Sales and EPS versus Analyst Forecast for Pure Storage. Source: money.cnn

The company is due to report its Q2 2022 earnings results in just over two weeks (25th Aug). Nevertheless, in general it is doing an impressive performance compared to the previous year, with total sales hitting $2.2B in Q1, exceeding analyst forecast at $2.1B. Its sales jumped nearly 30% compared to those in 2020. This has resulted in an EPS of $0.72, three times higher than in 2020.

Pure Storage did not disappoint in the first quarter of 2022. Reported sales were $620.4M vs consensus estimates at $521.7M. EPS last stood at $0.25, far exceeding analyst forecast which were $0.04. According to the management, its commitment to sustainability (drive out direct energy usage in data storage systems by up to 80%), market-leading portfolio innovation (Pure Fusion and Portworx Data Services that allow customers to bring infrastructure and applications closer together with cloud-like automation and storage delivery for traditional and cloud-native applications; FlashBlade for Distributed Scale Out File Storage which is easy to use, consistent performance at scale and positive customer experience), and partnerships with a few companies like SnowflakeKyndryl and even Amazon (AWS) are the keys for Pure Storage to be a leading pioneer in IT sector.

For the upcoming earnings announcement, the management has provided an optimistic guidance, with revenue expected to hit approx. $635M, while Non-GAAP operating income is expected to rise to $75M. Market consensus is positive too, with Sales expected to hit 636.2M, up 2.55% from the previous quarter and up 28.06% from the same period last year. EPS is expected to hit $0.22, slightly down from the previous quarter’s $0.25, but up 57.14% from the same period last year. According to Zacks Consensus Estimates, Pure Storage “boasts an average earnings surprise of 205.4%”. Perhaps Zacks’ findings such as solid earnings fundamentals, good VGM and momentum score, and a healthy financial condition in addition to factors listed in the previous paragraph are what makes Pure Storage an interesting candidate to check upon for the long term.

Technical Analysis:

#Purestorage remains traded above $29.21, or FR 50.0% which extended from the March high ($36.70) to May low ($21.72). $29.00 is the low estimate of analysts. The stock price has been on its gains for five consecutive weeks. If bullish momentum persists, the nearest resistance to watch is $31.00, followed by $33.50 and $36.70. On the other hand, if price breaks below current levels, the 100-day SMA will be challenged, followed by $27.45$25.25 and $21.72.

About the author

Larince Zhang

Larince entered the world of live market analysis and trading in 2013. Her passion ranges from foreign exchange to commodities, indices and futures as well as stocks. Having a Bachelor Degree majoring in Banking and Finance, she strives to make full use of her learned knowledge together with practical trading to achieve a more comprehensive market analysis.

Through years of trading experience, she believes “Simple is Best”, as the market is driven by human activity. It is human psychology that one should opt to improve on instead of mere technical or fundamental analysis. She believes in three core elements to a mature trading approach – scrupulous trading mindset, well-planned strategies and strict money management.