Pure Storage Inc (NYSE: PSTG) rallied more than 30% on Thursday after posting market-beating financials for its second quarter and raising guidance for the future.
Following the post-earnings surge, PSTG shares have more than doubled since early April.
Their forward price-to-earnings (P/E) ratio now sits well past 100 – making it reasonable to wonder whether it’s already too late to invest in Pure Storage stock.
But the good news is: several experts believe PSTG could extend gains further in the months ahead.
Valuation may not be a major overhang for Pure Storage stock
Wedbush’s senior analyst Daniel Ives once said, “if you focused on valuation – you missed every transformational tech stock the last 20 years.”
And the likes of Palantir Technologies have reinforced this year that his maxim has substance after all. The stock’s trading at a forward P/E multiple of 370 roughly – and yet there’s hardly any sign of an imminent crash.
More importantly, other experts are beginning to see eye-to-eye with Ives on valuations. Even Dan Niles recently conceded that it’s fair to “forget about valuations” in this market – something that, in his own words, he’s never endorsed in his 30 years of career in finance.
“This market is addicted to easy money. In such an environment, you’re paid to take risks,” he told CNBC in an interview today.
Also on Thursday, Fundstrat’s head of research Tom Lee said the momentum trade was unlikely to “end anytime soon” – which suggests PSTG stock could rip higher from here in coming months.
PTSG shares are poised to benefit from AI tailwinds
Valuation concern is particularly muted for Pure Storage shares as they have artificial intelligence (AI) winds at its back.
In a post-earnings interview with CNBC today, the company’s chief executive, Charles Giancarlo, said PSTG “plays into the AI environment in multiple ways.”
Giancarlo emphasized “performance is what it’s all about in an AI environment,” citing industry-leading benchmarks of the firm’s FlashBlade Exa and growing demand across North America and sovereign buyers.
That even made UBS analysts raise their price target on PSTG stock this morning to $85, indicating potential upside of another 7.0% from current levels.
Meta partnership could drive Pure Storage shares higher
Another compelling to reason to consider sticking with PSTG shares for the long-term is the firm’s strategic partnership with Meta Platforms.
Pure Storage started monetising its role as Meta’s primary storage supplier in its fiscal Q2, marking a tangible shift from promise to performance.
More importantly, the management expects to deploy up to 2 exabytes of capacity with META by the end of its current financial year – and on the earnings call, it reiterated confidence in reaching, and potentially exceeding that goal.
Simply put, with hyperscaler interest rising and AI workloads demanding energy-efficient flash solutions, Pure Storage’s positioning looks increasingly enviable.
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