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Why Is Pure Storage (PSTG) Up 10.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Pure Storage (PSTG - Free Report) . Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pure Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Pure Storage Inc. delivered non-GAAP earnings of 1 cent per share in the second quarter of fiscal 2019 comparing favorably with the Zacks Consensus Estimate of a loss of 5 cents. The figure also compared favorably with the year-ago loss of 11 cents per share.
Total revenues surged 37.5% from the year-ago quarter to $308.9 million and came ahead of the Zacks Consensus Estimate of $302 million. Revenues also outpaced management’s guided range of $296-$304 million.
Robust business fundamentals and strong go-to-market strategies drove year-over-year growth.
Moreover, Gartner has placed Pure Storage “as a leader in their Magic Quadrant” for the fifth consecutive year.
We believe that the company dominates the space driven by its robust all-flash and NVMe portfolio, leaving companies like NetApp, Dell EMC and Hewlett Packard Enterprise trailing.
Segmental Details
In the second quarter, Product revenues (represented 78% of total revenues) of $241.1 million surged 34% on a year-over-year basis, primarily driven by “strong repeat business” from existing customers and continued expansion of customer base.
Non-GAAP Product gross margin was 67.9%, down 40 basis points (bps) on a year-over-year basis due to FlashBlade’s increased contribution to revenues.
The company’s strong product portfolio including the likes of FlashArray, FlashStack and FlashBlade business segments drove year-over-year growth.
Pure Storage recently introduced FlashStack with FlashBlade to speed up the analytics processes for the data warehouses. Further, the company announced the availability of both AIRI and AIRI Mini, with select reseller partners.
Notably, AIRI and AIRI Mini which provide users with comprehensive AI ready infrastructure, leverages NVIDIA’s DGX-1 servers.
The new FlashStack solution, developed on its FlashBlade solution is customized to accelerate the performance of Oracle’s Data Warehouse.
Cisco’s tie-up with the company’s FlashStack continues to significantly accelerate overall converged infrastructure and integrated systems markets. FlashStack is well-positioned for the future as the company continues to invest with its partners in full stack automation and simplicity.
The company’s data platform for cloud is gaining traction. However, intensifying competition owing to the presence of major players such as Amazon’s Amazon Web Services (“AWS”) and Microsoft’s Azure in cloud storage remains a concern.
Support subscription revenues (22%) of $67.8 million increased a significant 51% on a year-over-year basis driven by the company’s ongoing support contracts.
Non-GAAP Support subscription gross margins were 68.4%, up 590 bps on a year-over-year basis. Management stated that margins were driven by a continued increase in amortization of ongoing support contracts and impressive execution in support organization.
During the reported quarter, Pure Storage added more than 400 new customers, bringing the total base to more than 5,150 organizations. Management remains elated on strong growth witnessed in Global 2000, big government organizations and healthcare companies as well as leading 1000 cloud vendors.
Geographically, the United States comprised 74% of total revenues while the remaining 26% came from international market.
Operating Details
Non-GAAP gross margin came in at 68%, up 80 bps from the year-ago quarter. The strength in gross margin was primarily driven by better-than-expected growth in products, lower cost and benefits related with the launch of our FlashArray//X product line.
Pure Storage reported non-GAAP operating income of $0.8 million comparing favorably with the loss of $23.1 million in the year-ago quarter. Non-GAAP operating margins during the reported quarter came in at 0.3%. The year-over-year improvement was due to the company’s sustained focus on improving operational efficiency and higher revenue base.
Balance Sheet & Cash Flow
Pure Storage exited the quarter ended Jul 31, 2018 with cash and cash equivalents, and marketable securities of $1.1 billion, flat sequentially.
Cash flow from operations during the quarter came in at $8.5 million.
Non-GAAP free cash flow without employee stock purchase plan (ESPP) impact for the quarter ended Jul 31, 2018 was reported at ($11.9) million.
Guidance
Pure Storage expects third-quarter fiscal 2019 revenues in the range of $361-$369 million. Non-GAAP gross margin is anticipated to be in the range of 64.5-67.5%. Non-GAAP operating margin is projected to be in the range of 4-8%.
For fiscal 2019, management revised anticipated revenue range from the initial range of $1.32-$1.36 billion to $1.35-$1.38 billion.
Moreover, management also updated the remaining guidance. Non-GAAP gross margin is now projected to be in the range of 65.5-67.5% (previously 63.5-66.5%). Non-GAAP operating margin is now anticipated to be in the range of 2.5-4.5% (previously 0-4%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 11.67% due to these changes.
VGM Scores
At this time, Pure Storage has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Pure Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Pure Storage (PSTG) Up 10.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Pure Storage (PSTG - Free Report) . Shares have added about 10.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pure Storage due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Pure Storage Inc. delivered non-GAAP earnings of 1 cent per share in the second quarter of fiscal 2019 comparing favorably with the Zacks Consensus Estimate of a loss of 5 cents. The figure also compared favorably with the year-ago loss of 11 cents per share.
Total revenues surged 37.5% from the year-ago quarter to $308.9 million and came ahead of the Zacks Consensus Estimate of $302 million. Revenues also outpaced management’s guided range of $296-$304 million.
Robust business fundamentals and strong go-to-market strategies drove year-over-year growth.
Moreover, Gartner has placed Pure Storage “as a leader in their Magic Quadrant” for the fifth consecutive year.
We believe that the company dominates the space driven by its robust all-flash and NVMe portfolio, leaving companies like NetApp, Dell EMC and Hewlett Packard Enterprise trailing.
Segmental Details
In the second quarter, Product revenues (represented 78% of total revenues) of $241.1 million surged 34% on a year-over-year basis, primarily driven by “strong repeat business” from existing customers and continued expansion of customer base.
Non-GAAP Product gross margin was 67.9%, down 40 basis points (bps) on a year-over-year basis due to FlashBlade’s increased contribution to revenues.
The company’s strong product portfolio including the likes of FlashArray, FlashStack and FlashBlade business segments drove year-over-year growth.
Pure Storage recently introduced FlashStack with FlashBlade to speed up the analytics processes for the data warehouses. Further, the company announced the availability of both AIRI and AIRI Mini, with select reseller partners.
Notably, AIRI and AIRI Mini which provide users with comprehensive AI ready infrastructure, leverages NVIDIA’s DGX-1 servers.
The new FlashStack solution, developed on its FlashBlade solution is customized to accelerate the performance of Oracle’s Data Warehouse.
Cisco’s tie-up with the company’s FlashStack continues to significantly accelerate overall converged infrastructure and integrated systems markets. FlashStack is well-positioned for the future as the company continues to invest with its partners in full stack automation and simplicity.
The company’s data platform for cloud is gaining traction. However, intensifying competition owing to the presence of major players such as Amazon’s Amazon Web Services (“AWS”) and Microsoft’s Azure in cloud storage remains a concern.
Support subscription revenues (22%) of $67.8 million increased a significant 51% on a year-over-year basis driven by the company’s ongoing support contracts.
Non-GAAP Support subscription gross margins were 68.4%, up 590 bps on a year-over-year basis. Management stated that margins were driven by a continued increase in amortization of ongoing support contracts and impressive execution in support organization.
During the reported quarter, Pure Storage added more than 400 new customers, bringing the total base to more than 5,150 organizations. Management remains elated on strong growth witnessed in Global 2000, big government organizations and healthcare companies as well as leading 1000 cloud vendors.
Geographically, the United States comprised 74% of total revenues while the remaining 26% came from international market.
Operating Details
Non-GAAP gross margin came in at 68%, up 80 bps from the year-ago quarter. The strength in gross margin was primarily driven by better-than-expected growth in products, lower cost and benefits related with the launch of our FlashArray//X product line.
Pure Storage reported non-GAAP operating income of $0.8 million comparing favorably with the loss of $23.1 million in the year-ago quarter. Non-GAAP operating margins during the reported quarter came in at 0.3%. The year-over-year improvement was due to the company’s sustained focus on improving operational efficiency and higher revenue base.
Balance Sheet & Cash Flow
Pure Storage exited the quarter ended Jul 31, 2018 with cash and cash equivalents, and marketable securities of $1.1 billion, flat sequentially.
Cash flow from operations during the quarter came in at $8.5 million.
Non-GAAP free cash flow without employee stock purchase plan (ESPP) impact for the quarter ended Jul 31, 2018 was reported at ($11.9) million.
Guidance
Pure Storage expects third-quarter fiscal 2019 revenues in the range of $361-$369 million. Non-GAAP gross margin is anticipated to be in the range of 64.5-67.5%. Non-GAAP operating margin is projected to be in the range of 4-8%.
For fiscal 2019, management revised anticipated revenue range from the initial range of $1.32-$1.36 billion to $1.35-$1.38 billion.
Moreover, management also updated the remaining guidance. Non-GAAP gross margin is now projected to be in the range of 65.5-67.5% (previously 63.5-66.5%). Non-GAAP operating margin is now anticipated to be in the range of 2.5-4.5% (previously 0-4%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 11.67% due to these changes.
VGM Scores
At this time, Pure Storage has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Pure Storage has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.