Analyst Wamsi Mohan of Bank of America Securities reiterated a Hold rating on Pure Storage (PSTG – Research Report), with a price target of $73.00.
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Wamsi Mohan’s rating is based on a combination of factors that suggest a cautious approach towards Pure Storage’s stock. The company’s first fiscal quarter is typically its weakest, with a seasonal decline in revenue, although this year the decline is expected to be slightly better than usual due to the ongoing adoption of FlashBlade//E. However, this adoption is also creating pressure on product margins, which is a concern. Despite this, the operating margin is projected to be slightly above street estimates, driven by strong subscription margins.
Looking ahead, while the operating margin is expected to improve in the second fiscal quarter, driven by favorable NAND pricing, there are still challenges. The enterprise storage market is becoming increasingly competitive, with potential macroeconomic uncertainties possibly affecting enterprise spending. Additionally, competition from companies like Dell and the need for increased investments to support hyperscaler deals pose risks to margins. These factors contribute to the Hold rating, as the potential for significant upside is limited by these competitive and economic pressures.
Mohan covers the Technology sector, focusing on stocks such as Apple, Seagate Tech, and Western Digital. According to TipRanks, Mohan has an average return of 10.5% and a 58.39% success rate on recommended stocks.
In another report released on May 20, Morgan Stanley also maintained a Hold rating on the stock with a $62.00 price target.