On Thursday, KeyBanc has increased its price target for Pure Storage (NYSE:PSTG) shares to $79, up from the previous $64, while maintaining an Overweight rating on the company's shares.
The firm highlights Pure Storage's ongoing transition to a recurring services-based business model as a key factor in its valuation.
The company has seen an increase in engagement with hyperscalers, moving from initial discussions to testing and commercial talks about replacing hard disk drives (HDDs) with their technology.
These developments are significant given that 80-90% of nearline storage at hyperscalers is still reliant on HDDs, indicating a substantial market opportunity for Pure Storage.
Additionally, Pure Storage is benefiting from its involvement in artificial intelligence (AI) through its Pure Fusion and Purity platform, which offers virtualized storage solutions.
KeyBanc notes a recent win with a managed service provider specializing in high-performance computing, as well as other potential opportunities with GPU infrastructure providers.
The analyst believes that Pure Storage's unique technology, which is based on a single-code software platform, positions the company well to capitalize on these opportunities.
The increased estimated value/sales (EV/S) multiple reflects the firm's optimism about Pure Storage's growth prospects in these areas.
InvestingPro Insights
With KeyBanc's recent upgrade of Pure Storage's (NYSE:PSTG) price target, it's worth considering additional insights that could further inform investors. According to InvestingPro, Pure Storage holds a significant strength in its balance sheet, as it holds more cash than debt, providing financial flexibility (InvestingPro Tip #0). Moreover, the company is expected to see net income growth this year, which could signal a positive outlook for profitability (InvestingPro Tip #1).
InvestingPro Data shows Pure Storage with a market capitalization of $20.48 billion and a robust revenue growth of 2.8% for the last twelve months as of Q4 2024. Despite a high P/E ratio of 317.66, the company has demonstrated a high gross profit margin of 71.4%, which suggests efficiency in their operations. Additionally, the recent price performance has been strong, with a year-to-date return of 76.67%, reflecting investor confidence in the company's direction.
For those interested in deeper analysis, InvestingPro offers further tips on the company's valuation multiples and stock performance trends. With the use of the exclusive coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a total of 18 InvestingPro Tips for Pure Storage, which could provide a more comprehensive understanding of the company's financial health and market position.
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