On Thursday, Susquehanna maintained a Positive rating on Pure Storage (NYSE:PSTG) stock and raised its price target to $75 from the previous $65.
The firm's analyst pointed to Pure Storage's strategic positioning to capitalize on the burgeoning AI sector, which demands high-performance, low-latency storage solutions.
The recent win of a significant AI deal, cited as a low-eight-figure Gen AI deal, was highlighted as an indicator of Pure Storage's competitive edge in the market.
Pure Storage's product FlashBlade//E, which offers storage at less than $0.20 per GB, was noted for its potential to drive down total cost of ownership (TCO) by significantly reducing operational costs, such as power, cooling, and labor. The product's rapid growth trajectory was underscored as the fastest in the company's history.
The analyst's outlook for Pure Storage was optimistic, anticipating that the company would outperform IT spending into the calendar year 2025, propelled by TCO advantages of their new QLC products and a focus on subscription software with the Evergreen service model.
Despite the promising outlook, the analyst advised caution due to the potential volatility in quarterly trends. This caution stems from the increased adoption of consumption-based models and the concentration of Cloud Service Provider (CSP) exposure, particularly with Facebook (NASDAQ:META).
Susquehanna's updated earnings per share (EPS) estimates for Pure Storage for fiscal years 2025 and 2026 stand at $1.65 and $2.16 respectively, compared to the current consensus of $1.55 and $1.83.
The new price target of $75 is based on a blend of financial metrics, including 35 times the updated fiscal year 2026 earnings per share, 6 times enterprise value to sales, 22 times enterprise value to EBITDA, and 18 times book value.
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