Pure Storage Faces Near-Term Pressures, But Has Long-Term Tailwinds, Says Bullish BofA

Pure Storage Inc PSTG reported fourth-quarter revenue Thursday that was well below Street expectations, but guided to 30-percent revenue growth for F2020, according to Bank of America Merrill Lynch.

The Analyst

Bank of America Merrill Lynch’s Wamsi Mohan maintained a Buy rating on Pure Storage and reduced the price target from $33 to $30.

The Thesis

The provider of data storage hardware and software products missed the consensus estimate by $20 million. This was due to manufacturing woes, which now seem to be behind the company, Mohan said in a Friday note.

Backed by continued strong adoption of its FlashArray and FlashBlade products, Pure Storage guided to F2020 revenue of $1.735-$1.805 billion. This represents 30-percent growth, which is much better than competitors, the analyst said.

Newer applications like NVMe (non-volatile memory express) and artificial intelligence continue to favor Pure Storage’s products, Mohan said. The company also has additional cloud revenues coming online in 2020.

Although the BofA lowered its revenue estimate for F2020 from $1.81 billion to $1.79 billion, the sell-side firm said that Pure Storage could beat its $2-billion F2021 guidance with improving profitability and strong cash flow.