A Bullish Sell-Side Reacts To Pure Storage's Q3

Flash storage company Pure Storage Inc PSTG reported third-quarter results Monday and announced a new suite of cloud offerings. Here's how the Street reacted to the print.

The Analysts

• Bank of America Merrill Lynch's Wamsi Mohan maintains a Buy rating on Pure Storage with an unchanged $33 price target.
• JMP Securities' Erik Suppiger maintains at Market Outperform, unchanged $26 price target.
• KeyBanc Capital Markets' Alex Kurtz maintains at Overweight, unchanged $30 price target.
• Wells Fargo's Aaron Rakers maintains at Outperform, unchanged $30 price target.
• BMO Capital Markets' Tim Long maintains at Outperform, unchanged $30 price target.

Bank Of America: Strong Quarter

Pure Storage's Q3 is highlighted by another period of more than 30-percent revenue growth from a year ago, Mohan said in a note. The company continues to take advantage of new applications like non-volatile memory express, or NVMe, and artificial intelligence, while new cloud revenue streams will be coming online next year, the analyst said. 

The quarterly report and outlook imply that Pure Storage will continue to see solid adoption at its current scale of more than $1 billion in annual product revenues, according to BofA. 

JMP: 3 Key Takeaways

Pure Storage's earnings report has three key takeaways that reinforces the bullish case for the stock, Suppiger said in a note. They are:

• FlashBlade experienced its strongest growth and likely accounted for more than 10 percent of total revenue.
• The continued shift toward NVMe capabilities validates the company's status as being an early leader in the market.
• The company's new block storage service will stand out from the competition.

Related Link: Goldman Sachs Turns Bullish On NetApp, Upgrades Pure Storage To Neutral

KeyBanc: 'Major' Product Launch

In conjunction with Pure Storage's quarterly print, the company detailed a strategic product roadmap for hybrid cloud that will be offered through the AWS marketplace, Kurtz said in a note.

While Pure Storage didn't quantify the financial impact, the company will focus on capturing net new customers; building and running tier-one-type apps in AWS; and focusing on existing customers who wish to maintain a consistent infrastructure across clouds, the analyst said. 

Wells Fargo: Favorable Outlook

Investors may be concerned the market is slowing at a time when competition is increasing, Rakers said in a note.

Pure Storage's Q4 revenue guidance of $438 to $446 million — versus the Street's $440.6 million estimate — should be "viewed as positive," the analyst said. Deferred revenue growth rose to $461.2 million exiting Q3, which is up $48 million quarter-over-quarter and 29 percent year-over-year, he said. 

BMO: Pure Storage's Strategy Is Working

Pure Storage's earnings report shows the company's focus on cloud and Fortune 500 customers is "clearly paying off," Long said in a note. During the quarter, cloud customers represented more than 30 percent of all revenue, while Fortune 500 customers accounted for more than 35 percent of total revenue.

Win rates are also impressive, especially for FlashBlade, where the company is winning in a market that is becoming more bifurcated, according to BMO. 

Price Action

Pure Storage shares were up 5.65 percent at $18.52 at the time of publication Tuesday.

Related Link: Despite 'Executing Well,' Pure Storage Catches Analyst Downgrade