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Pure Storage: Firing On All The Right Cylinders

Sep. 03, 2022 7:11 AM ETPure Storage, Inc. (PSTG)4 Comments
Gary Alexander profile picture
Gary Alexander


  • Pure Storage has successfully rebounded off 2022 lows driven by continued strong fundamental performance.
  • The company continues to grow revenue at north of a >30% y/y pace, while its largely software-driven offerings have boosted its gross margin profile.
  • Unlike many other tech companies, Pure Storage raised its outlook for the remainder of 2022.
  • Pure Storage has long traded at a deep value ~3x forward revenue multiple that makes it a very safe buy.
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Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PSTG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Pillpoppinpuppy profile picture
I think estimating intrinsic business value by applying a multiple to revenue is misguided. It is an approach conjured up by Wall Street to separate people from their money. Businesses have value because of what they earn.

PSTG is currently trading at 13X, 15X and 17X estimated EBITDA for years ending January '23, '24 and '25. That doesn't seem unreasonable for a company with strong growth.

I find the comparison with NTAP interesting. My model suggests that both companies are a buy based on the multiples at which they are currently trading relative to their historical multiples. I am more drawn to NTAP because it is trading at 6X EBITDA, has a 2.8% dividend yield, is aggressively repurchasing its stock (a 7.7% yield over past 12 months), and is projected to increase revenue by 6% (FY ending 4/23 to FY-ending 4/24).

In comparison, PSTG is at 13X EBITDA, has no dividend yield, has a 2.2% buyback yield, and is projected to increase revenue by 15% (FY-ending 1/23 to FY-ending 1/24) over the next year. I think you would be paying up too much for its stronger revenue growth.

Both companies have net cash on their balance sheets. Also, NTAP has a 2% short interest v. 7% at PSTG.

Finally, on a philosophical basis, I don't like how Giancarlo apparently is being dishonest about NTAP's capabilities. There was a long article on CRN about this: www.crn.com/...
MikeFromNZ profile picture
@Pillpoppinpuppy I appreciate your comments, they always seem really smart and well-informed. I read the interview. Doesn't PSTG offer higher growth vs. NTAP?
Pillpoppinpuppy profile picture
@MikeFromNZ Thanks for that. PSTG is growing faster, though off a smaller base. For example, in their latest fiscal years, NTAP increased revenue by $574 MM while PSTG grew by $497 MM, but that was 30% growth for PSTG vs. 10% for NTAP. Next year looks similar. Bloomberg has PSTG growing by 15% from FY ending 1/23 to FY ending 1/24 and NTAP growing by 6% from FY ending 4/23 to FY ending 4/24.
@Pillpoppinpuppy Only a $77,000 (15% ) difference in dollar revenue growth between PSTG and NTAP whereas the market of NTAP is almost double that of PSTG ( $15.6 billion v.s. 8.63 billion for PSTG. I think I’ll stick with PSTG and you can keep your 2.6% dividend. Or sell your NTAP and buy PSTG and a reit for your dividend.
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