Enterprise Data Storage Company pure storage (PSTG) reported that its sales outlook for the rest of the fiscal year was lower than expected, citing headwinds from the shift to a subscription model. PSTG shares fell sharply Thursday despite third-quarter earnings beating Wall Street expectations.
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Pure Storage said late Wednesday that it earned an adjusted profit of 50 cents a share in the third quarter on sales of $763 million. Analysts polled by FactSet on average expected Pure Storage to earn an adjusted profit of 40 cents a share on sales of $761 million. Ends November 5th.
Pure Storage’s profits increased 61% year-on-year, and sales grew 13%. This quarter is Pure Storage’s third quarter of fiscal 2024.
PSTG shares fell more than 18%, opening at 31.03 points Today’s stock market. The stock last traded down about 13%.
PSTG Stock: Forecast lacks perspective
Pure Storage, headquartered in Mountain View, California, provides high-speed data storage systems to enterprises using all-flash chip technology. Facebook parent company Yuan (Mehta)Is a major client.
The company’s forecast for next quarter apparently sparked a strong reaction from investors.
Pure Storage forecasts current fiscal fourth-quarter sales of $782 million. Analysts expected $919 million, according to FactSet. For the full fiscal year ending February 5, Pure Storage forecast sales of $2.8 billion. Analysts expected sales to grow 7% to $2.96 billion.
Moving to a subscription model
In an interview with CNBC Shortly after the earnings report was released, Pure Storage CEO Charles Giancarlo said that once investors have more time to digest the results, they will realize that Pure’s story is a “good story.” Giancarlo also noted that the company is moving towards Subscription model This is based on the consumption of its storage facility, called Evergreen No.1.
“Certainly as we move to a subscription model, that means near-term capital expenditure revenue will be replaced by longer-term, richer subscription and consumer revenue,” Giancarlo said. “Much of the change in the forecast is actually due to this acceleration development of consumption patterns.”
Pure Storage’s subscription service revenue increased by more than 26% compared with the same period last year $309.6 million, the company said.
Pure Storage Chief Financial Officer Kevan Krysler said on the earnings call that there was additional headwinds surrounding a $41 million order from telecommunications companies that won’t be fulfilled until after this fiscal year.
Wedbush analyst Matt Bryson maintained an outperform or buy rating on PSTG stock in a client note Thursday. He said the business still has a solid future and the shift to subscription revenue will bring real benefits.
“However, we also believe the stock’s reaction may not be as dramatic if management does a better job of communicating to Wall Street the impact of the shift to (software-as-a-service) revenue,” Bryson wrote, including providing more metrics. to display Pure Storage service option adoption
PSTG Stock: Data Storage Group Leader
PSTG shares rose 5.7% to close at $37.93 on Wednesday before falling after the earnings report. Another data storage company, web application company (NTAPShares rose more than 15% on Wednesday following the earnings report Tuesday night. The company beat earnings and revenue estimates and gave a sales forecast ahead of schedule.
With Thursday’s losses, PSTG stock gapped below its 50- and 200-day moving averages, IBD MarketSmith said.
According to IBD’s 10 stocks in the computer data storage industry category, Pure Storage ranks first after entering the profit-making stage. IBD inventory checkThe stock has a IBD Comprehensive Rating 87 out of 99 points.
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