Investing.com -- Piper Sandler upgraded Pure Storage (NYSE:PSTG) from Neutral to Overweight following a significant design win with a top-4 cloud hyperscaler.
The analysts highlighted the deal as a game-changer, saying it creates a "pure opportunity" ahead that could generate over $500 million in revenue by 2026 and position the company for further growth in cloud and AI markets.
The win, according to Piper Sandler, "removes risk and creates a catalyst for upside ahead."
The firm believes it also signals Pure Storage's growing differentiation in the market, with the large software deal showcasing its appeal to cloud players, particularly around AI use cases.
Flash storage is gaining momentum, particularly in the cloud and AI sectors, where Pure's offerings are carving out a competitive edge, says Piper.
"The narrative shifts to Cloud & AI over STaaS," the analysts noted, adding that Pure Storage's shift away from its Storage-as-a-Service (STaaS) transition has effectively eliminated a revenue headwind.
Pure's FQ3 results exceeded expectations in traditional sales but saw challenges in lead metrics. Despite this, Piper Sandler believes the hyperscaler deal and broader market dynamics present a strong case for growth.
"We see further estimate upside and room for multiple expansion," they stated, raising their price target to $76, which represents 25x estimated 2026 EBITDA. Their bull-case valuation for the stock stands at $104 per share.
Piper Sandler concluded that Pure Storage's strong market position, coupled with its success in the cloud and AI space, positions it well for sustained growth.
"More hyperscalers could be coming," they suggested, underscoring the potential for additional opportunities in the future.