ByTiernan Ray June 14, 2017 4:09 p.m. ET Shares of flash-memory-based storage equipment provider #PureStorage (PSTG) closed up 2 cents at $12.68, after the company yesterday held its annual analyst day meeting, in conjunction with its “Accelerate” conference, during which the company talked about a goal of reaching $2 billion in annual revenue in the fiscal year ending in 2021. The company also offered several announcements about new product offerings and technologies. For more on those, see the company's press relations Web site. In introductory remarks, CEO Scott Dietzen hit all the important buzz terms, telling analysts that Pure is involved with artificial intelligence and cloud computing projects, and self-driving vehicles, and network “edge” data harvesting, and how Pure’s equipment achieves economies of scale in many of those areas that he said traditional storage equipment can’t manage.
CFO Timothy Riitters told the crowd "we fundamentally believe that we've got a greater than $2 billion opportunity out in what we call our calendar 2020 or what's also known as fiscal 2021."
"That means that business is growing at greater than 30% CAGR [compounded annual growth rate] over those course of next 3 years to deliver that market opportunity.” Riitters also affirmed a goal of $1 billion in revenue this year.
Among Street comments today, Mehdi Hosseini with Susquehanna, who has a “Positive” rating on the shares, was impressed with both revenue growth comments, and also profit prospects.
“We do not rule out PSTG turning profitable a quarter earlier than expected (Oct Q, vs. Jan Q),” writes Hosseini, "given encouraging commentary around salesforce productivity, FlashBlade momentum and Opex seasonality."
He also thinks the revenue goals "underscore our belief that PSTG can deliver on its $1B Revenue target from FlashArray alone, while investors get a call-option on FlashBlade."
Pure’s target for operating profit margin in 2021 "is conservative, given historical trends, improved sales productivity, and management optionality on Opex investment."
Hosseini also liked that the company sees its newer “FlashBlade” product increasing sales at a rate of twice that of the earlier “FlashArray” product. He likes how the company is “positioned” to “capture both ends of the spectrum” of what are known as “scale out” and “scale up” storage needs.
Pacific Crest’s Alex Kurtz, reiterating an Overweight rating, and a $17 price target, writes that Cisco Systems (CSCO) is becoming more and more important to Pure’s pursuit of the market:
#Pure highlighted momentum with its #Cisco partnership during opening remarks, accounting for 1,400 joint customers out of 3,350, growing 70% y/y. As the #Dell/ #EMC and #Cisco partnership fragments, and with #HPE acquiring #Nimble, Cisco will need to diversify its converged infrastructure business with independent array vendors like Pure Storage. For perspective, during the height of the #VCE relationship, EMC/Cisco drove >50% of the integrated systems market and Cisco benefited from EMC/VCE to help drive >50% of its historical UCS revenue (per IDC from C2013).
Kurtz also noted the company’s technology is letting it go after bigger deals:
Pure has finally announced a competitive solution to EMC's SRDF platform with ActiveCluster, delivering competitive replications at sub 5 milliseconds with a stretch cluster over 100 miles. We see this launch enabling Pure to compete for EMC VMAX deals that are often 1.5-2x in size given a second target array used for full replication. We see this helping increase penetration rates of the Global 2000, 12% in F1Q18. Pure also announced META, its AI for improving storage portability.
Wells Fargo’s Maynard Um reiterates a Market Perform rating, writing that the company’s discussion was “positive with respect to near-term fundamentals and the long-term opportunities for the company."
The assumptions the company presented in its outlook are “reasonable,” though it’s hard to say if there’s upside to that because "we believe visibility is limited particularly,” writes Um, "in light of our expectation for intensifying competition as Dell EMC and HPE regroup (we think HPE, in particular, is under pressure to show revenue growth, resulting in the potential for price competition)."
R.W. Baird’s Jayson Noland reiterates a Neutral rating, and a $14 price target, writing that the company seems less of a takeout target.
Noland notes that all the talk of A.I. and cloud and such served to “highlight the company’s increasingly strategic position against the backdrop of several emerging use cases,” while noting that "several in management voiced a preference toward independence, indicating to us that a strategic takeout is less than likely."
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