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Why You Should Retain Pure Storage in Your Portfolio Now

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Pure Storage Inc. (PSTG - Free Report) is rapidly gaining traction in the flash storage market. Shares of this Zacks Rank #3 (Hold) stock have gained 96.0% in the past year, substantially outperforming the industry’s rally of 25.5%.

The momentum can be attributed to rapid adoption of its robust product portfolio and strong fundamentals.

Let’s delve deeper and find out why the stock is poised to sustain the momentum ahead.

Positive Earnings Surprise History

Pure Storage has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 53.24%.

Northbound Revisions and Growth Projections

The company has been witnessing upward estimate revisions, reflecting analysts’ optimism. The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 83.3% upward to 11 cents, over the last 60 days.

Furthermore, the company has a long-term expected EPS growth rate of 15%.

Robust Adoption of Expanding Product Portfolio: Key Catalyst

Expanding customer base bodes well for Pure Storage’s top-line. In the fourth quarter, the company added more than 500 customers, bringing the total base to 4,500 organizations and reflecting an increase of 50% from the year-ago quarter.

Notably, the provider of efficient cloud-capable flash solutions continues to focus on three major aspects, namely increasing cloud customer base, solidifying the position of its next generation workload related core data infrastructure and tapping large enterprises as they “cloudify” their on-premise IT infrastructure.

The company’s strong product portfolio with the likes of FlashArray and FlashBlade business segments remains the key catalyst. Additionally, its data platform for cloud is gaining traction.

Per a ResearchandMarkets report, cloud storage market is anticipated to grow at a CAGR of 29.73% from $25.17 billion in 2017 to reach $92.49 billion in 2022. The company is well poised to grab the opportunity.

Management is optimistic about scalable storage solutions in an era when the world is typically being driven by big-data, artificial intelligence (AI) and data analytics-based information.

Pure Storage strengthened its partnership with NVIDIA (NVDA - Free Report) ; a dominant player in AI related computation, to expand product offerings. The company recently released AIRI in collaboration with NVIDIA.

AIRI is claimed by the company to be a first-of-a-kind AI ready infrastructure. AIRI will cut short the time required for data to generate valuable insights significantly, consequently accelerating innovation.

Per Gartner, 80% of enterprises are anticipated to deploy AI within 2020, which enhances the prospects of AIRI.

Other Positives

Pure Storage reported stellar fourth-quarter fiscal 2018 results. It was the first profitable quarter for the company since it went public. The company reported its first ever non-GAAP operating income of $27.9 million and margin of 8.3%. Positive free cash flow for the full-year ended Jan 31, 2018 was reported for the first time in the company’s history at $7.7 million, compared with ($61.2 million) in fiscal 2017.

Underlying Risks

The aforementioned points will enable Pure Storage to remain afloat in difficult times. However, the company continues to face intense competition due to the presence of major players such as Amazon’s (AMZN - Free Report) Amazon Web Services (“AWS”) and Microsoft’s (MSFT - Free Report) Azure in cloud storage.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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