The artificial intelligence (AI) revolution is driving the demand for low latency, scalable, and reliable data storage and capacity. Pure Storage Inc. (NYSE: PSTG) is a leading provider of enterprise data storage with its all-flash solid-state drive (SSD) arrays. The computer and technology sector leader is riding two major tailwinds: the AI revolution and storage modernization. Pure Storage's Flash Arrays are fast enough to access data in real-time foregoing the need to copy it from one silo to another. Pure Storage provides storage-as-a-service (SaaS) multi and hybrid cloud solutions to over 13,000 customers, including 62% of the Fortune 500.
Its FlashBlade platform enables fast parallel live data access to manage data at rest and data in motion, which can include streaming real-time data. The company announced its launch of GenAI pods that provide a one-stop solution for deploying generative AI. It's a turnkey system that provides a pre-configured platform ready to use that's been specifically designed for AI workloads and industries.
Pure Storage Makes a Deal With a Top-4 Hyperscaler
Pure Storage noted that it had been awarded an industry-first design win with a major top-four hyperscaler in its Q3. The company didn't provide specifics but noted that it extends its DirectFlash technology into massive-scale environments, which are currently dominated by hard disk drives (HDDs) made by Seagate Technology Holdings plc (NASDAQ: STX) and Western Digital Co. (NASDAQ: WDC). It could be either Microsoft Co. (NASDAQ: MSFT), Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc. (NASDAQ: GOOGL), or Meta Platforms Inc. (NASDAQ: META).
Pure Storage CEO Charles Giancarlo commented, "Pure Storage has achieved another industry first in our journey of data storage innovation with a transformational design win for our DirectFlash technology in a top-four hyperscaler.”
Giancarlo concluded, “This win is the vanguard for Pure Flash technology to become the standard for all hyperscaler online storage, providing unparalleled performance and scalability while also reducing operating costs and power consumption."
Solid Growth in Q3 in Upside Guidance
Pure Storage earned 50 cents per share in Q3 2024, which beat analyst estimates by 9 cents. Revenue rose 9% YoY to $831.1 million, nicely beating the $814.9 million consensus estimates. Subscription and annual recurring revenue (ARR) rose 22% YoY to $1.6 billion. Remaining performance obligations (RPO) grew 16% YoY to $2.4 billion. The company closed the quarter with total cash and marketable securities of $1.65 billion. Pure Storage also repurchased 3.6 million shares in the quarter, returning $182 million to shareholders.
The company issued upside revenue guidance for Q4 2024 of $867 million versus consensus estimates of $855.87 million. Pure Storage forecasts a non-GAAP operation margin of 15.6%.
PSTG Forms a Cup Pattern
A cup pattern forms after peaking at a swing high to form the cup lip line resistance, falling to a swing low, forming a rounding bottom, and rallying back up to retest the cup lip line resistance.
PSTG formed the cup lip line at the $70.41 swing high on June 18, 2024, before falling to the $44.73 swing low and staging a rally up toward $58.20 before losing steam. PSTG formed a gap-fill channel of $53.79 and $60.28 after reporting solid Q3 results and raising its Q4 guidance. PSTG still needs to rally back to the rest of the cup lip line resistance at $70.41 to complete the cup pattern before potentially forming a handle on the pullback. The daily anchored VWAP is at $49.86. The daily RSI is attempting to coil at the 71-band. Fibonacci (Fib) pullback support levels are at $60.28, $55.33, $52.38, and $47.97.
PSTG’s average consensus price target is $72.10, implying an 11% upside and its highest analyst price target sits at $93.00. Fifteen analysts have Buy ratings, six have Hold ratings, and one has a Sell rating. The stock has a 2.83% short interest.
Actionable Options Strategies: Bullish investors can consider using cash-secured puts at the Fib pullback support levels to buy the dip. If assigned the shares, writing covered calls at upside Fib levels executes a wheel strategy for income.
