Pure Storage Stock Has 22% Upside, According to 1 Wall Street Analyst

One highly specialized tech stock that is attracting plenty of attention from investors lately is the aptly named Pure Storage (PSTG -1.27%). In a world awash in data, larger and faster storage systems are a necessity, not a want, for many clients. Pure Storage is on the cutting edge of that segment.

The company has won the attention of analysts, too, and often it’s been the positive kind of attention. Many are bullish on its future, including one prognosticator from a big bank who recently tagged it with a buy recommendation.

Initiated with a solid buy recommendation

In mid-March, Citigroup analyst Asiya Merchant launched her bank’s coverage of Pure Storage. In slapping a buy sticker on the shares, she set a price target of $65 apiece. Given the current price, that implies an upside of 23% over the next 12 months or so for the stock.

“With 100% of its portfolio based on all-flash, Pure participates in the highest-growth sub-segment of external storage,” Merchant wrote in her inaugural research note on the stock.

She added that artificial intelligence (AI) and machine learning (ML) functionalities “are likely to further catalyze growth,” for flash memory service providers. That’s not only a function of the increased space needed to support this technology; Flash is also good for quick storage and retrieval, as its name implies.

Growth is in store, however…

There’s a bit of incongruity between Merchant’s very positive take on Pure Storage and the company’s recent pronouncements.

It’s guiding for double-digit percentage rate improvements in both revenue and operating income. While that’s certainly encouraging, at the moment the stock is priced more like an explosive growth company than the relatively modest growth story it’s laying out for investors. That $65 price target over 12 months, then, might be somewhat extravagant.