Durable Goods (Jun F) -9.4% vs 9.3% Prior, Ex-Trans 0.2% vs 0.2%
On Thursday, Citi analysts, led by Asiya Merchant, adjusted the price target for Pure Storage (NYSE:PSTG) shares, reducing it to $77 from the previous $80, while keeping a Buy rating on the stock. The revision followed a trading session where Pure Storage’s shares fell by 8% after the market closed, a reaction to the company’s reported decline in product gross margins which seemed to overshadow its better-than-expected revenue and operating income. According to InvestingPro data, Pure Storage has demonstrated strong momentum with a 50.5% return over the past year, despite recent volatility. The company maintains a market capitalization of $20.37 billion and shows robust revenue growth of nearly 8% in the last twelve months.
Pure Storage management attributed the decrease in product gross margins to two main factors: the accelerated adoption of their E-class family, which is designed to compete with traditional hard disk drives (HDDs), and the dynamics of NAND pricing. Despite the current margin pressure, the company anticipates an improvement in product gross margins as NAND pricing stabilizes and the E-class family of products gains further market traction. InvestingPro analysis reveals the company maintains strong financial health with a current ratio of 1.77 and holds more cash than debt on its balance sheet, providing flexibility to navigate through margin pressures.
The initial guidance for fiscal year 2026 presented by Pure Storage was somewhat below market consensus, suggesting a steady IT spending environment. While no additional financial details regarding the company’s significant hyperscaler customer win were disclosed, management did note that they are making progress in the next stages of testing and deployment. Moreover, discussions with other potential hyperscaler clients are reportedly picking up pace, although these are still in the early stages.
In their commentary, Citi analysts acknowledged the short-term margin volatility linked to the ramp-up of new products but expressed a positive outlook for Pure Storage’s future. The analysts cited the ongoing growth in flash storage and subscription services, along with the potential for market expansion as a result of the hyperscaler win, as reasons for their constructive stance. The maintained Buy rating and the new $77 price target are based on an unchanged forward price-to-earnings ratio of 32 times for the next twelve months. Currently trading at a P/E ratio of 156, InvestingPro analysis indicates the stock appears overvalued compared to its Fair Value. Discover 15+ additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
In other recent news, Pure Storage Inc . reported strong financial results for the fourth quarter of fiscal year 2025, surpassing analysts’ expectations. The company achieved an earnings per share (EPS) of $0.45, exceeding the forecasted $0.41, and reported revenue of $879.8 million, above the projected $868.53 million. For the full fiscal year, revenue grew by 12% year-over-year to $3.2 billion, with subscription services revenue increasing by 17%. Despite these positive earnings, the company’s stock saw a decline in aftermarket trading. Pure Storage also maintained a robust cash position with $1.5 billion in cash and investments. Looking ahead, the company projects an 11% revenue growth for fiscal year 2026, aiming for just over $3.5 billion. In terms of analyst activity, there was no mention of upgrades or downgrades from firms. The company’s strategic focus remains on expanding its product line and capitalizing on opportunities in AI data management and storage.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.