On Thursday, TD Cowen adjusted its outlook on shares of Pure Storage (NYSE:PSTG), reducing the price target to $70 from the previous $80, while retaining a Buy rating on the stock. This adjustment comes in response to the company's latest financial disclosures.
Pure Storage recently reported financial results for the July quarter that exceeded expectations, yet the guidance for the October quarter did not meet analyst forecasts. Despite this, the company reaffirmed its full-year financial outlook, which failed to meet the more optimistic projections of some investors.
The firm's analyst noted that while the market's reaction to the full-year outlook confirmation was lukewarm, there are positive developments on the horizon. Specifically, a significant design win with a major hyperscale customer is anticipated, which the management of Pure Storage is confident will bolster market sentiment.
The analyst's commentary highlighted the contrast between the solid performance in the July quarter and the cautious October quarter guidance. The potential for improved investor sentiment hinges on the expected design win, which could play a critical role in the company's performance going forward.
In summary, while Pure Storage's near-term outlook has led to a revised price target, the company's consistent full-year outlook and potential upcoming design win provide a basis for maintaining a positive long-term rating on the stock.
In other recent news, Pure Storage reported an 11% increase in revenue for the second quarter of fiscal year 2025, reaching $764 million, and a 24% rise in subscription services annual recurring revenue (ARR), surpassing $1.5 billion.
Despite the financial services firm, Needham, reducing its price target to $62 from $80, and Piper Sandler revising its price target down from $60 to $56 due to growth concerns, Pure Storage has maintained its full-year revenue target of $3.1 billion. This is in spite of longer sales cycles for larger Evergreen deals and a projected decrease in product gross margins due to the transition to all-flash solutions.
Significant recent developments include the introduction of next-generation Fusion architecture and AI storage-as-a-service for GPU clouds. These innovations underscore Pure Storage's commitment to advancement in the sector. Additionally, the company added 261 new customers in the second quarter and is focused on replacing traditional storage in hyperscaler data centers.
Despite the elongated sales cycles leading to a revision of Total Contract Value (TCV) sales growth expectations to 25% year-over-year, down from the previously projected 50%, Pure Storage's management is confident in its strategy. They anticipate announcing a hyperscaler design-win by the end of the year, indicating potential growth opportunities. The company's financial position remains robust with $1.8 billion in cash and investments.
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