Pure Storage Inc. (NYSE: PSTG), which posted market-beating results for its second quarterly and raised guidance for the future, rallied by more than 30 percent on Thursday.
Since early April, PSTG’s shares have doubled in value following the surge after earnings.
Pure Storage’s forward P/E ratio is now well above 100, making you wonder if it’s too late to buy Pure Storage.
The good news: according to several analysts, PSTG’s gains could be extended in the coming months.
Pure Storage’s stock may be undervalued.
Daniel Ives, senior analyst at Wedbush Securities said that “if you focus on valuation you will miss every transformative tech stock in the past 20 years.”
Palantir Technologies, for example, has confirmed this year that the maxim he made is not just a fanciful idea. Stocks are trading with a P/E ratio of about 370, but there is no sign that a crash is imminent.
Other experts have begun to agree with Ives’ valuations. Dan Niles, who has spent 30 years in the finance industry, recently admitted that valuations are not important in today’s market.
This market has a problem with easy money. “In such an environment you are paid to take risk,” he said in an interview with CNBC today.
Tom Lee, Fundstrat’s Head of Research said on Thursday that the momentum trade would not “end any time soon”. This suggests PSTG could continue to rise in value over the next few months.
PTSG is poised to gain from AI tailwinds
Pure Storage’s shares are less likely to be affected by valuation concerns, as the company is backed up by artificial intelligence.
Charles Giancarlo said that PSTG, in a CNBC interview today after the earnings announcement, “plays into AI’s environment in many ways.”
Giancarlo stressed that “performance in AI is everything,” citing the industry’s leading benchmarks for FlashBlade Exa, and the growing demand throughout North America.
UBS analysts raised their price target for PSTG this morning from $85 to $85, which represents a potential increase of 7.0% over current levels.
Meta Partnership could Drive Pure Storage Shares Higher
The strategic partnership between PSTG and Meta Platforms is another compelling reason to hold on to PSTG’s shares over the long term.
Pure Storage began monetising Meta’s role as its primary storage provider in the second quarter of its fiscal year, marking a shift away from promises to results.
On the call to discuss earnings, management reiterated its confidence that it would reach and possibly exceed this goal.
Pure Storage is a leader in the market, and its position looks more and more enviable as hyperscalers’ interest grows, while AI workloads demand energy-efficient solutions.
The post Pure Storage Stock: Another AI Name Demonstrating Valuation isn’t Everything may be updated as new developments unfold.
