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Despite 'Executing Well,' Pure Storage Catches Analyst Downgrade

Despite 'Executing Well,' Pure Storage Catches Analyst Downgrade

Pure Storage Inc (NYSE: PSTG) reported a top-and-bottom-line beat in its fourth quarter results, but digging beyond the headline numbers reveals a few concerning metrics, according to Susquehanna.

The Analyst

Susquehanna Financial Group's Mehdi Hosseini downgraded Pure Storage's stock from Positive to Neutral with an unchanged $22 price target.

The Thesis

Pure Storage's earnings report was "strong" and management's guidance for the first quarter was "encouraging," Hosseini said in a note. However, three notable takeaways from the earnings report should be of concern to investors, including:

  • FlashBlade is gaining traction beyond artificial intelligence deployments, but it's unclear the extent it can compete in file storage environments dominated by Dell EMC's Isilon;
  • The company isn't expecting a notable decline in NAND average selling prices until the bottom half of 2018; and
  • Cloud accounted for more than 30 percent of total sales although it's not clear if this was driven by Flash Array or Flash Blade, which is a key driver of the stock.

The midpoint of management's fiscal 2019 revenue and gross margin guidance came in just in-line with Hosseini's expectations. This likely implies that any revenue scaling is "not evident" or convincing enough to justify a revision to the analyst's estimates higher, which would serve as the "net leg of appreciation" moving forward.

Price Action

Shares of Pure Storage were trading lower by more than 5 percent at $20.64 Friday morning.

Related Links:

Why Micron Should Consider Buying Pure Storage

4 Reasons To Store Some Pure Storage In Your Portfolio

Latest Ratings for PSTG

Oct 2019UpgradesMarket PerformOutperform
Oct 2019UpgradesNeutralBuy
Sep 2019UpgradesHoldBuy

View More Analyst Ratings for PSTG
View the Latest Analyst Ratings

Posted-In: cloud cloud storage Dell EMCAnalyst Color Earnings News Downgrades Analyst Ratings Best of Benzinga


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