Fundamental analysis
The company produces hardware and software solutions for bulk data storage. Pure Storage has its own proprietary system of backup, data compression and methods of storing data on various media. Founded in 2009, it came to prominence in 2011. Pure Storage has received several funding rounds from investors in the range of $30-150 million. It has been profitable since 2017.
Pure Storage focuses on the B2B sector and more than 97% of its sales come from US-based companies. It has more than 11,000 customers.
The company sells both subscription services and physical hardware for its products. The revenue split is roughly 50% and 50%. The company claims that it is difficult to replicate its business model and know-how as it owns both the physical hardware and the architecture and supporting software.
Results
In 2023, the company achieved a turnover of USD 2.6 billion. In 1Q 2023 alone, the firm achieved a 29% increase in sales. The firm is focusing more on its subscription system for its services. It is actively offering a «Pure-as-a-Service» system that offers subscription rates based on the GB of storage used. This reduces the cost of trying out the service and leaves it up to the customer to decide how many GB to use. The increase in the subscription amount is 29%.
The company has a decent amount of spare capital of USD 173 million.
It added 273 new customers in 1Q, now covering 58% of Fortune 500 companies.
Technical analysis
Moving averages indicate an upward trend. The current price is held by support at USD 35.
The RSI is in the neutral zone after coming back from the overbought zone after the strong growth in the last weeks.
Conclusion
Pure Storage is an innovative company and a leader in its industry. An industry that is clearly growing as the company managed to acquire over 250 new customers per quarter and thus has over 50% penetration in the Fortune 500. Its products are therefore in demand by large companies. We don’t know the payment rates of individual customers, but their size tells us that it is cheaper to outsource their own needs to Pure Storage and thus pay for the service. Because of their size, this may mean some stability in revenue. The subscription model is also clearly proving successful, with subscription levels growing at 29% per quarter. In the long term, the company certainly has potential, its own results and share growth demonstrate this.
However, if large customers are forced to cut back due to their own economic developments, Pure Storage could lose customers quickly, as cancelling subscriptions is the easiest form of saving. And so the share price could fall again.