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On Thursday, Piper Sandler reaffirmed its Overweight rating on Pure Storage (NYSE:PSTG) shares with a steady price target of $76.00. The firm’s analysis acknowledged Pure Storage’s fourth fiscal quarter performance, which surpassed apprehensions. The company, now valued at $20.37 billion, managed to align its guidance with the market expectations for fiscal year 2026. According to InvestingPro data, Pure Storage maintains strong fundamentals with a healthy gross margin of 71.07% and robust liquidity, as evidenced by a current ratio of 1.77. Additionally, Pure Storage experienced an increase in discussions with other major cloud service customers and made progress with an existing large-scale cloud project. The quarter’s revenue and EBIT figures also exceeded forecasts.
Despite these positive indicators, Pure Storage’s shares faced a downturn in after-hours trading, adding to the 7.91% decline over the past week. The decline was attributed to several factors: a dip in gross margins, continued challenges in the as-a-Service portfolio, which showed normalized growth of approximately 13.5% for the year, and a slowdown in remaining performance obligations (RPO). While the stock trades at a relatively high P/E ratio of 156.06, Piper Sandler expressed confidence in the company’s guidance for the future, suggesting that the management is on track with realistic expectations. InvestingPro analysis indicates the stock appears overvalued at current levels, though it’s worth noting the impressive 50.53% return over the past year.
The firm’s commentary highlighted that the focus for Pure Storage should not be solely on fiscal year 2026 figures. Instead, the execution of deals with major cloud providers, the potential for securing additional significant cloud contracts, enterprise data center upgrades, including the increased adoption of flash storage, and forthcoming product announcements at the GTC conference are all considered key drivers for the company. With revenue growth of 7.97% and strong financial health scores from InvestingPro, which reveals 15 additional key insights about Pure Storage’s performance and potential, the company appears well-positioned for future growth opportunities. Furthermore, the growing opportunity for Portworx, Pure Storage’s data management platform, to replace VMware (NYSE:VMW) solutions adds to the company’s potential positive outlook.
Piper Sandler concluded by stating that, given the setting of fiscal year 2026 targets and the presence of these promising catalysts, the post-market decline in Pure Storage’s stock price presents an appealing opportunity for investors. The firm reiterated its stance on buying the dip, maintaining an Overweight rating and a price target of $76.00 for Pure Storage shares.
In other recent news, Pure Storage reported impressive financial results for the fourth quarter of fiscal year 2025, surpassing analysts’ expectations with earnings per share of $0.45 and revenue of $879.8 million. The company also saw a 12% year-over-year revenue increase, reaching $3.2 billion for the fiscal year. Despite these positive earnings, Pure Storage’s stock experienced a decline in aftermarket trading. Subscription services revenue grew by 17%, marking a significant rise in recurring revenue streams. Citi analysts adjusted the price target for Pure Storage shares to $77 from $80, while maintaining a Buy rating, following a reported decline in product gross margins. The company attributed the margin pressure to the increased adoption of their E-class family and fluctuations in NAND pricing. Pure Storage is optimistic about future margin improvements as NAND pricing stabilizes and the E-class family gains more market traction. Discussions with potential hyperscaler clients are reportedly advancing, though they remain in early stages.
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