On Tuesday, Barclays (LON:BARC) adjusted its stance on Pure Storage (NYSE:PSTG) stock, downgrading it from Overweight to Equal Weight and maintaining a price target of $51.00.
The downgrade follows a significant increase in the company's share price, which has risen 70% year-to-date, outpacing the COMP's 10% gain.
The firm acknowledged Pure Storage's strengths, including gains in storage market share, a shift towards software and services, and margins higher than the industry average.
Despite these positives, the firm noted that Pure Storage's revenue is still largely derived from on-premises business, which is subject to macroeconomic influences.
Barclays also pointed out that the current valuation of Pure Storage now fully reflects its potential in AI data centers and the opportunity to replace disk storage with flash storage.
The focus for Pure Storage is expected to be on the hyperscaler opportunity, continued growth in software, and improvement in financial metrics. The Portworx ramp and the potential for margin leverage are also areas of interest.
The report highlighted the anticipation of strong subscription growth, which may come at the expense of product growth, projecting a 3% headwind to revenues due to stronger sales of Evergreen One & Flex (NASDAQ:FLEX) offerings.
Barclays has made no changes to its financial model or the target price, which is based on 5 times its fiscal year 2025 revenue estimate of $3.1 billion. The decision to downgrade the rating to Equal Weight is attributed to the recent run-up in the stock's valuation.
InvestingPro Insights
As Barclays adjusts its stance on Pure Storage (NYSE:PSTG), a look at the real-time data and InvestingPro Tips can provide additional context for investors considering the stock's recent performance and future prospects. Pure Storage holds a market cap of approximately $19.54 billion and has shown a notable price total return of 148.02% over the last year, which aligns with the significant share price increase mentioned by Barclays. Despite a high P/E ratio of 305.53, the company's net income is expected to grow this year, suggesting potential for future earnings expansion.
InvestingPro Tips highlight that Pure Storage has more cash than debt on its balance sheet and liquid assets exceed short-term obligations, indicating a solid financial position. Furthermore, the stock is trading near its 52-week high, with a price percentage of 99.36% of this peak value. Investors should note that the company does not pay a dividend, which may influence investment decisions depending on individual income strategies.
For those seeking a deeper dive into Pure Storage's metrics and strategic analysis, there are additional InvestingPro Tips available, which can be accessed through the InvestingPro platform. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and explore the full range of insights, including 17 additional tips that offer a comprehensive look at Pure Storage's financial health and market position.
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