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Pure Storage – Its business growth is accelerating but its stock price suffered a setback – what’s next?
For those readers whose taste runs to classic movies, perhaps the most famous of the classics of the 1940s is the movie Casablanca. For sure, they don’t make them as they used to. If you know Casablanca at all, or alternatively if you are a fan of the BBC, you will know the song or the show “As Time Goes By” most famously performed by Dooley Wilson as Sam, the piano player in the gin joint or having starred Judy Dench and Geoffrey Smith if you watched the show. The lyrics from the song famously state (famous, at least to this author) that “a kiss is still, a kiss, a sigh is just a sigh” Of course the lyrics didn’t proclaim that a miss is still a miss, or a guide down is still a guide down but somehow that is what came to my mind when I looked at Pure’s Q3 results and its revised its guidance.
Was this really a case of a guide down, or something else, entirely? This is a case in which the guide is completely misleading and doesn’t accurately portray Pure’s outlook in terms of either growth or profitability. In fact, the opposite is true, and this guidedown is because growth is actually strengthening. A conundrum to be sure, and one I hope to solve for readers on the pages of this article.
The song doesn’t talk about enterprise storage which didn’t exist back then or at least in no form recognizable as such, nor did it talk about a guidedown of which Pure Storage was alleged to be guilty. But I felt compelled to drag the analogy into play when writing about what Pure Storage (NYSE:PSTG) actually reported and how it actually guided. The song goes on to say “the fundamental things apply, as time goes by.” And ultimately, in my opinion, that will be true for Pure’s share price performance.
It is certainly true that the headlines at the time of the earnings release in late November talked about lighter-than-expected guidance-and if one looks at the headline numbers the headlines are accurate. But to reiterate, the fundamental things still apply and when investors look at Pure considering its actual growth, its actual margins and cash flow, and its competitive positioning, the company is firing on as many cylinders or battery cells as may be possible at this point.
This is an article reiterating and expanding on my Pure Storage buy recommendation which I published on SA back in June. The shares are up about 7% since the publication of that article. Most tech stocks as measured by a variety of ETFs such as the IGV (up by 20%) and the WCLD (up by 12%) are higher over the same span by a somewhat greater percentage. I will argue that the company’s 3 year CAGR is likely higher now than was the case back in June, while the company’s margin trajectory is also likely to be higher. A stronger company, with a rising market share, a steadily improving business, and a lower relative price…the things of which a reiterated purchase recommendation should be made. I will start by writing about what Pure actually announced and how it guided before looking at some of what I see happening at the company that has actually augmented my enthusiasm for the shares.
Pure exists in the market as it is. There are many commentators who have written at great length about pivots, Fed statements and bubble valuation. Whatever else is true, Pure does not have a bubble valuation. Even though it has had the characteristics of an enterprise IT company, it has never enjoyed that kind of valuation. At this point, Pure has one of the most compressed relative valuations of any of the companies that I follow, and it seemingly has less downside risk when compared to its brethren.
What did Pure report and how did it guide – it really wasn’t meant to be a guide down and is probably excessively conservative
Pure is now one of the leading vendors in the enterprise storage space. For any reader unfamiliar with the space it is important to note that it has been one of the more cyclical components of the IT business. Part of this is the fact that until fairly recently all of its revenues came from purchases of hardware rather than from “as a service’ business arrangements. In addition, enterprise storage demand is all about capacity additions. Just about anything that is usage-based will turn out to be cyclical as recently has been seen in terms of cloud utilization trends for the hyper scalers and for others. That means that the major storage vendors do see periods in which revenue growth is flat or negative.
For the quarter recently reported, Pure’s revenue grew by 13% year over year, more or less in line with the company’s prior forecast. The company’s non-GAAP gross margin of 74%, was up by 120 bps sequentially. The company was profitable on both a GAAP and a non-GAAP basis with non-GAAP operating margins of 22% compared to a prior forecast for non-GAAP operating margin of 18%. EPS for the quarter was $.0.50 compared to a prior estimate of $0.40. The company’s free cash flow margin for the quarter was 15% which includes capex in the quarter of $45 million.
Some metrics are strange, no doubt, for a company that is seen as a hardware vendor. The company’s backlog (RPO balance) grew by 30%. Subscription ARR grew by 26% to $1.3 billion and subscription revenue also grew by 26% and is now 41% of total revenues.
As the headline linked above suggests, the shares fell based on the perception that guidance was being reduced. I can’t say that the headlines are wrong – I can say that the message woefully miscommunicates both the state of Pure’s business and the actual Q4 revenue outlook. At the end of Q2, the company had forecast full-year revenues just short of $3 billion. It is now forecasting full-year revenue of $2.82 billion. That takes the Q4 revenue projection from about $950 million to about $780. Except that is not exactly the Q4 forecast. Basically, the company wanted to convey that adjusted for the pivot to subscription, and the timing of the recognition of a large teleco order, its FY ’24 outlook was unchanged. To do so, given the results of the 1st 3 quarters, required a Q4 “forecast” of $780 million, although this was essentially the remainder of the adjusted FY 2024 forecast and not some kind of specific estimate for the Q4 period. It sets up a consensus expectation that is far more likely than not to be exceeded, if for no other reason than some Q4 seasonality coupled with business momentum exiting Q3.
While I can blame a flawed paradigm and miscommunication for the current Q4 consensus, the FY 2025 forecast is essentially what analysts have extrapolated. Although not yet guided by the company, the 1st Call Analyst consensus for the next fiscal year, that of 2025 is now for revenues to be around $3.2 billion, or growth of 12%.
The company’s forecast for non-GAAP operating margins for the full year has gone to 16% up slightly from the prior projection, but substantially below the prior Q4 operating margin projection, basically a function of revenue forecast for Q4. Pure is not losing its expense discipline or starting to ramp its hiring. The 1st call consensus EPS forecast for next year has gone from $1.67 to $1.53.
What is actually going on here? How much of the forecast revisions represent negative business trends, and how much represents something entirely else? Simply put, objectively, business trends are all positive, although self-evidently headline metrics depict a different picture. The real picture is that growth for Pure Storage arrays is accelerating but the business arrangements for this acceleration are based on subscriptions, and most particularly on growth of Evergreen/One and Evergreen/Flex. Specifically, Evergreen/One revenues are now expected to double year over year from $200 million to $400 million, significantly greater than prior expectations.
The math presented by the CFO suggests that without the mix switch, and the shipment scheduling of a massive telco order which is to be recognized on a capex basis, annual revenue growth would have been 7% rather than 2.5% now forecast. In other words, the CFO has presented an analysis that suggests that the entirety of the guide down is related to the pivot toward shipments of subscription arrays-this is also the case for the $41 million telco order which will now be shipped next quarter rather than in Q4; instead of shipping a $41 million that would be immediately recognized as revenue, Pure will ship a like amount of product that will be recognized on a subscription basis.
I recognize the desire on the part of the CFO and the Pure management to indicate that they are reaffirming their forecast. This is probably not the most transparent way to do so. It is unfortunate, but sometimes in talking about pivots and forecasts, it is as though what seems to be apparent and the actual reality of the order of ships passing in the night. The company wasn’t really explicitly forecasting Q4 but forecasting the full year, but analysts and investors were looking at Q4. I confess that I am surprised when I see an experienced CFO not appreciate just how that kind of forecast might be received. I imagine that if a forecast were made for Q4 revenues, based on business activity in Q4 it would show different, and substantially more positive trends, even on a headline basis.
In any event, as the conference call transcript suggested on several occasions, the company is calling for accelerating growth-usually accelerating growth would find its way into a stronger overall revenue forecast.
Despite the efforts of the CFO, I find myself unable to entirely reconcile the forecast the CFO provided for Q4 with my expectations of the relationship between subscription revenues, subscription revenue growth and what the company calls capex revenue. While I understand that a pivot to a higher level of subscription sales, all other things being equal, will have an impact on overall reported revenues, I doubt that the factors the CFO used to reach his numbers are entirely valid. It would be difficult for me to understand how an extra $50 million of subscription revenues might result in overall revenues, both product and subscription, falling by $85 million, but without additional data, I will just do a bit of head-scratching and suggest that the acceleration of Evergreen deployments will ultimately produce significantly positive trends for revenue growth and will ultimately accelerate positive margin trends as well.
The company actually acknowledged during the conference call Q&A that essentially Q3 bookings were greater than planned, and some of its revised guidance is meant to take account of earlier than planned deal closure:
And the sales team did a really nice job executing throughout the quarter. And part of this strong execution included accelerating fulfillment and probably of a subset of product orders that would have been expected to close in Q4. So there is an impact there as well. And hopefully, that adds some additional color for you there.
Pure didn’t comment explicitly on expectations for FY’25, but to reiterate, the 1st Call revenue consensus is for 12% growth. While prudence in forecasting is desirable in this environment, I imagine that this expectation is based in part on the rather tepid results of competitors in the space. In fact, a significant part of Pure’s growth is coming from market share gains. I would further mention that current surveys regarding IT spending growth which are for mid-high single-digit increases, would support a significantly higher growth expectation for both the storage space as a whole and for Pure’s actual revenue growth.
Needless to say, trying to handicap the growth in Pure Evergreen revenues vs. the growth in Pure’s storage shipments that are accounted as a purchase is, at the least, a fraught exercise. In evaluating Pure’s valuation it ultimately doesn’t matter. The company has reset forecast expectations-at least for Q4. Those expectations, at least to this writer, seem ultra-conservative, and over a multi-year span, a pivot to subscription revenues will most probably increase the actual CAGR.
But I think two important things to take away that we’re seeing. One is that demand has strengthened and is expected to strengthen through the first half, and that’s a good sign for us. And second is the momentum on for Evergreen/One and strength we’re seeing for a variety of reasons that Charlie walked through. And so both those factors will be in play in terms of how we think about next year, but would want to get through Q4 before providing anything more specific for next year.
I am an analyst and an investor. It would, I believe, be hard to put anything but a favorable gloss of some magnitude on the CFO’s comment shown above. I am all for demand strengthening, and when demand is strengthening in an environment in which competitors are struggling to see much beyond the most marginal demand improvement, so much the better.
The pivot I have tried to describe showed up noticeably in the RPO balance which rose by 30% year over year last quarter compared to growth of 26% the prior quarter. In other words, the growth of backlog is accelerating which indicates, as well that the value of bookings is also rising substantially. Further, ARR growth is also maintaining strong levels. It (ARR growth) grew by 26% last quarter, year on year, and by 8% sequentially. Most other companies with that kind of ARR growth have significantly higher valuations.
And the pivot also showed up in capex: last quarter’s capex was $45 million, and it was $152 million for the first 9 months of the year, an increase of more than 50% compared to the same period a year earlier. The preponderance of Pure’s capex is the value of storage arrays that it rents to Evergreen customers; the fact that this has tripled year over year is an indication of just how strong demand is for Evergreen storage from Pure. Pure recently opened its new headquarters facility; with that use of funds ending, the growth of capex is likely to moderate in future quarters.
Looking holistically, and beyond the barest headlines, the fact that growth at Pure, adjusted for the pivot to subscription revenues is accelerating-and is most likely accelerating by more the metrics articulated by the CFO. And given that Evergreen margins are ultimately greater than outright purchases-what Pure refers to as capex purchases, the pivot will add to operating margins as well.
Ultimately the pivot will show up in a higher base of recurring revenues with stronger margins, as renewals become a greater proportion of revenues, and as users continue to add Evergreen storage capacity to handle additional workloads.
Why is this happening? Part of the reason has to do with macro trends. With higher interest rates, at least until recently, users are themselves pivoting from what Pure calls capex consumption, to a subscription model which conserves short-term cash. A second point is a sales strategy that incents subscription as opposed to capex.
Unlike other transitions, I don’t expect that Pure will ever have a preponderance of revenue coming from subscription arrangements. There are classes of customers who will always want to own their own storage-the Telco customer mentioned above is typical of that class of buyer. And in addition, Pure is likely to always sell storage arrays to hyper-scalers such as Meta (META). Hyper-scalers have never chosen to use a subscription arrangement for acquiring storage and I doubt that they ever will. Forecasting the cadence of the remaining transition to subscription is very fraught undertaking. In a given quarter, particular transactions can move the needle. That was true last quarter when Pure closed a substantial level of larger agreements – 8 of what it calls SLAs which are complex and large Evergreen agreements.
The company is now offering what it calls “service level agreements” in which the company provides customers with guarantees regarding power usage and rack space within an Evergreen agreement. This is likely to further accelerate the swing to Evergreen subscription.
Evergreen subscription deployments have been exceptionally sticky, and that is likely to be even more the case with customers signing SLAs. The SLAs guarantee that there will be no costs related to downtime, no future data migrations for hardware replacement, upgrades, and expansions, and zero data loss. Since these agreements are only available to Evergreen customers, they will likely further tile the mix to subscription revenues going forward.
Pure’s new products – How are they doing? Are AI workloads becoming meaningful?
When I last wrote about Pure, I emphasized the product initiatives that I thought would be driving significant growth acceleration. As mentioned, while the growth acceleration is happening, its ultimate financial impact is being masked by the pivot to the Evergreen subscription offering.
The company has now completed the introduction of both FlashArray E and FlashBlade E. The price/performance advantages of these products seem to be overwhelming and the opportunity to replace legacy spinning disks is just getting underway and is a primary component of the company’s stronger sales outlook.
The storage industry has always been characterized by macho leadership when it comes to claims about pricing, performance and total cost of ownership. That is still the case. I have no real way of evaluating the specific advantages that Pure has relative to its principal competitors. I will point out that the company has been a pioneer in the use of QLC NAND, and this is the factor that has allowed it to reach price/performance levels that rival the TCO of spinning disks. I don’t want to go into a detailed discussion of technology that Pure has been using to achieve differentiated levels of price/performance. The numbers really speak for themselves in that regard-particularly the increase in non-GAAP gross margins as will be discussed later in this article.
How are the new products doing? This is how CEO Charley Giancarlo addressed the subject.
That growth is still the fastest growth of any new product that we’ve had here at the company. So we’re very pleased with the growth, but it’s still at the – we’re only two full quarters in. So it’s – we anticipate that will be a much more meaningful part of our revenue next year.
I don’t really think I can add very much when it comes to the above statement. The new generation of storage from Pure has hit both a new price point and a new cost of ownership level. The ability to replace spinning disks is almost surely the largest single opportunity in Pure’s TAM. The E product line is probably the strongest competitive offering Pure has ever had in the marketplace. Both factors are leading to enhanced market share gains.
In the wake of the revised revenue guidance for Q4, it might have been considered normal to review CAGR estimates for this company. It is my belief that Pure’s 3-year CAGR is not well represented by the company’s current forecast. My 3-year CAGR estimate remains at 24%, and given the pricing dynamics of the E series, I think that number will ultimately prove to be conservative.
Even though the pivot to Evergreen subscriptions is constraining reported revenue growth this year, over time, this pivot adds to, rather than subtracts from growth. It should be further noted that Evergreen sales are based on minimum contractual commitments. The concept of Evergreen is that it is a consumption service. The actual revenue from these contracts will be based on storage usage above the minimum commitment in the contract. Storage has been around for a long time, and storage growth/storage capacity has inevitably grown faster than forecast over any multi-year period. I expect that will be the case for Evergreen users and this is likely to add to Pure’s expected CAGR.
Pure’s Competitive Position
The enterprise flash storage market is forecast to grow at rates of about 24% based on the analysis linked here over the next few years. I believe that Pure’s CAGR will be greater than that; I am forecasting a 24% CAGR consistent with the growth of the market, although I feel this to be exceptionally conservative.
I don’t in any way want to suggest that I have some unique ability to discern market share trends in enterprise storage. I absolutely do not. The industry is populated by big ego types, and it is hard not to become jaded by a plethora of competing claims.
That said, I felt the story I have linked here is particularly relevant to investors in terms of the competitive dynamic in the space. There are many similar stories that came out of Pure’s latest sales meeting that can be readily accessed and reprise similar themes. Here is a link to just one of many such articles. Pure is currently shipping products that have dramatic advantages over spinning disk, and the advantage will almost certainly get larger over current years.
Of course like most storage claims there are caveats and nuances. Currently, the latest Pure arrays have a significantly more attractive TCO than spinning disk when considering costs such as space, heat dissipation and power consumption. Of at least equal significance – the failure rate of HDD is still greater than 1% meaning significant human-related management expense.
A few months ago, Pure announced FlashBlade//E. I highlighted that announcement when I last wrote about Pure as an investment. 6 months later, Pure shares haven’t done much, but FlashBlade//E, as the CEO indicated during this most recent conference call has had the most rapid adoption of any product the company has ever introduced.
The reason for that is pretty straightforward. I commend the linked article to readers for a rather straightforward explanation of the economics and the technology. Of course, the article is a commercial but the facts are the facts. One hesitates to use sensation words like “revolution” in writing about anything to do with investments. But the fact is that the ability of FlashBlade//E to “wipe out” spinning disk is quite revolutionary.
Earlier in this article I wrote about a $42 million order from a telco. That order was for the replacement of spinning disk. While this link – actually a webinar – is a commercial from Pure, the point is still valid. Telcos are a particular target for the replacement of spinning disks simply because of issues related to the cost of ownership. At the end of the day, Pure’s market share is rising simply because it offers users significant TCO advantages, and has a set of unmatched consumption alternatives. And I don’t expect that to change for the foreseeable future.
The opportunity to replace spinning disks is the largest that Pure has ever been able to address and one that seems highly likely to contribute to continuous and substantial market share gains.
One argument frequently made regarding Pure and its competitors relates to what barriers there might be to larger companies replicating the hardware products that Pure has recently announced. Storage is most often thought of as hardware and since one can take pictures of storage arrays, it does occupy a physical presence. But software has been part of the picture for years-NetApp for example has built its offerings around Ontap.
Pure has a substantial barrier entry that is difficult for its larger rivals to match as this quote suggests. Here that barrier is presented by Pure management in a pretty straightforward fashion that might lay to rest concerns about entry barriers.
. “Anyone can copy the DFM,” says Giancarlo. “What’s hard to replicate is the software that operates them. The software that runs SSDs is that which was designed for HDDs, but it’s sub-optimal when you put it on flash. That makes it more costly and it doesn’t last as long.”
“We’ve pierced the 7,200rpm HDD market with the 20c per gigabyte price point. There will be no place left for disk to operate”Charles Giancarlo, Pure Storage
He’s talking about the on-board firmware on solid-state drives and contrasting that with Pure’s patents in software that knit together the raw flash on the DFM into a much larger whole, with management functionality across the whole unit that’s built for the job.
“That means we will accelerate the density of DFMs faster than the SSD makers can,” he said. “It’ll take years to get where we are.”
Essentially, that is the ability to gain access to data held on such drives.
According to Pure’s director of technical strategy, Eric Burgener, other suppliers could put lots of flash on a drive and give it some management software, but they would lack the 10-ish years of Pure’s IP built into its Purity operating environment that allows for efficient input/output.
Storage growth has been cyclical for as far back as there has been an enterprise storage industry. So just looking at revenue growth rates can be misleading. And with Pure’s pivot, that is even more the case. But regardless, last quarter, Pure revenues grew, NetApp (NTAP) revenues fell and Dell storage revenues fell (DELL) quite sharply. This was probably the quarter in which Pure’s market share showed the greatest increase in at least several years. Interestingly, Dell, in an otherwise dismal storage quarter, called out unstructured data as a strong point in demand. Much of that has to do with AI workloads that tend to rely on unstructured data. Pure’s FlashBlade/S has been a notable share gainer in that space, mainly because of performance. For those interested, I have linked here to a spec sheet for FlashBlade//S.
The investment merits and demerits of Pure’s most significant competitors, NetApp and Dell have been seen the last two quarters. Some readers who focus on value in their portfolios will be interested in NetApp. Ticker Target owns a small position in NetApp shares in the Ticker Target Income/Stability portfolio. But when it comes to growth, there really is little contest between Pure and the many other vendors in the enterprise storage space.
Pure’s Business Model – Continued improvement, probably to be accelerated and amplified by its subscription pivot
As mentioned, despite the pivot in Pure’s business model toward subscription, last quarter was a significant upside in terms of operating margins. Overall, non-GAAP operating margins reached 22% compared to 16% in the year-earlier period.
I was particularly impressed with non-GAAP gross margin progression. Non-GAAP gross margins were 74% last quarter, up from 71% a year ago, and up from 70.4% the prior sequential quarter. Subscription gross margins, i.e. the component of the business that includes Evergreen offerings, achieved gross margins in the quarter of 75.4%, up by more than 300 basis points year on year, and by 250 bps sequentially.
It isn’t all that usual to see gross margin swings of such magnitude in a single quarter. Management described their current pricing as aggressive. What that seems to mean is that because the company’s newest products offer such significant value to users and are highly differentiated, discounting has been lower than normal and was lower than forecast.
Gross margins can fluctuate quarter to quarter, and I certainly don’t imagine that this current quarter will see the same kinds of positive sequential trends-but when considering investing in Pure, this kind of gross margin attainment is certainly worth noting.
Operating expense ratios also showed a favorable evolution. Overall, the non-GAAP operating expense ratio was 51% last quarter compared to 55% in the year-earlier period. Non-GAAP operating expenses were up by less than 6% in dollars year on year, and actually fell by 8% sequentially. Similar trends were experienced across all expense categories.
While the company didn’t explicitly discuss opex trends, and it did increase its yearly margin guidance, I would be surprised if the forecast is actually consistent with current expense trends. The company is barely increasing headcount, which suggests to me that the trend of quarterly opex seen last quarter is likely to continue.
The current 1st call consensus calls for no improvement in non-GAAP operating margins next year. I would be quite surprised, or something more than quite surprised, if that turned out to be the case. The company is carefully managing expenses and the pivot to subscription sales won’t result in higher operating expenses. I believe that it is this consensus that has created a particularly favorable setup with regard to expectations over the coming year.
Pure, as a result of the margin trends indicated above, is now GAAP profitable. As a result, the outstanding share count increased about 10% last quarter to 330 million outstanding which now encompasses contingent shares as is the current accounting convention.
Pure continues to use stock-based compensation which was reported at 11.5% of revenues last quarter compared to 12.9% of revenues in the year-earlier period. As mentioned, the company reported an outstanding share count of 330 million last quarter, and I have used 335 million outstanding shares in calculating valuation metrics.
Although Pure shares have rallied along with much else in the broad market and in the IT space, their EV/S ratio is just greater than 3X. I have projected a free cash flow margin of 15%. Through the first 9 months of the year, the company’s free cash flow margin was 14% with a significant headwind because of changes in other assets and liabilities.
The net of a 24% CAGR estimate, a 15% free cash flow estimate and an EV/S of 3X is that the shares are valued more than 35% below average, and probably more than that depending on the cadence of acceptance of the company’s newest products.
Wrapping Up – Reiterating the case to buy Pure shares
Pure’s most recent quarterly report was misread in my opinion and the subsequent share pullback has created a very favorable entry point. The company CFO, in an effort to communicate that business, was continuing at levels forecast at the start of the fiscal year, substantially botched the message, and the result was headlines proclaiming a “light” forecast. The forecast provided was for a full year adjusted for a pivot to more subscription sales; initially, it was perceived as some reflection of the business decline in this current quarter. No doubt the aim was for transparency – the result was anything but.
Pure has seen a breakthrough quarter in terms of sakes of its Evergreen subscription model. Evergreen revenues are now seen as doubling this year considerably greater than prior estimates. A pivot from an outfight capex sale, to a subscription sale self-evidently has the impact of deferring revenue recognition. The company has suggested that the impact of the greater Evergreen deployments and the deferred deployment of one capex sale of $42 million to a telco, will have the impact of reducing sales over the course of the full fiscal year by about $125 million. The company chose to provide a chart in which the complete financial impact of this pivot was shown in Q4 leading to headlines that suggested “light” guidance. Those headlines sent the shares down 19% in a couple of days.
The reality is that Pure’s business is strong, and the strength is accelerating. Q3 bookings were above plan and all of the KPIs associated with the company’s subscription offering showed accelerating gains. Market share gains also increased last quarter.
There are several reasons for the breakthrough in Evergreen sales. In the current environment changing a capex into an opex to conserve cash is desirable. The Evergreen agreements provide for contractual minimums in terms of billing with true-ups during the course of a contract. In addition, Evergreen offers user contracts that can include costs associated with power, rack space and heat dissipation in addition to no downtime upgrades.
The ultimate impact of the pivot will be to accelerate overall acceptance of Pure in the market and will further increase the CAGR for Pure as the impact of renewals and upgrades builds over time. The pricing of Evergreen is aggressive-not aggressively cheap but aggressive in terms of gross margins. The company has offerings that are noticeably better than competitors in terms of reliability, form factor, heat dissipation and power consumption and it is charging its users for those advantages as seen in rising non-GAAP gross margins.
Beyond the specifics of forecast revisions and less than optimum communications of the business outlook, Pure’s future over the next few years will be the uptake of its E series of storage arrays. This is proceeding at rates the company describes as greater than any other product it has ever introduced. The ability of the pricing and the function of the E series to put an end to spinning disks over the next couple of years is not yet really in published outlooks for the company.
The enterprise storage market has always been highly cyclical and it has demanding users who demand execution at a level that can be difficult to fulfill 100% of the time. These are the principle risks for Pure-and oh, yes, that of communicating its outlook in a transparent and well-reasoned basis. I maintain a 10% position in Pure Storage shares for the Ticker Target high growth model portfolio and feel comfortable with that weighting. I expect it to generate significant alpha over the coming year.
