Everpure (NYSE: PSTG), the tech company formerly known as Pure Storage, has become a key beneficiary of the artificial intelligence (AI) data center boom. Over the past three years, shares have gained more than 150%. Still, the stock has faced big-time volatility. In nine of Everpure’s last 12 earnings releases, shares have swung up or down by at least 10% the next day. Four of those moves have been to the upside, while five have been to the downside.
After the company’s latest report, Everpure got the short end of the stick, seeing its shares drop by 10% in response. This came even though the company beat estimates and issued better-than-expected guidance.
On the one hand, Everpure is experiencing strong and accelerating growth, having just achieved $1 billion in quarterly revenue for the first time. On the other hand, soaring memory chip prices and strategic shifts are clouding the company’s outlook.
Let’s break down these dynamics to gain an updated perspective on Everpure going forward.
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PSTG Cements Shift Into Data Management and Intelligence as Everpure
First off, it is important to understand why Everpure changed its name from Pure Storage, as it signals the firm's strategic trajectory. The company started out by providing high-performance data storage hardware. Its all-flash systems offered huge speed and efficiency improvements over traditional hard disk drive (HDD) storage.
The company’s Purity operating environment offers a unified platform for managing all of its storage hardware. Additionally, the company’s hardware and software are fully upgradable. If a customer buys a storage array, they can repeatedly upgrade for years as technology improves without having to buy a completely new system. This early focus, primarily as a storage provider, led to the name Pure Storage.
The company’s focus on speed, operating efficiency, and upgradability allowed it to gain significant share in the enterprise data market.
Everpure says that since 2013, it has gained 13% market share. Meanwhile, legacy competitors like Dell Technologies (NYSE: DELL) and International Business Machines (NYSE: IBM) have lost significant share.
However, the company has continually added layers of software over the years to transition from a data storage company to a data management company. Its acquisition of 1touch, announced alongside the name change, highlights this. The company says that 1touch will allow its customers to “better understand the meaning of their data and unlock its strategic value through AI and other applications."
Thus, the company wants to help customers not only store their data but also understand how to use it in deploying AI. By removing “storage” from their name, they are signaling their shift to a more complete data management and intelligence platform. As enterprise AI usage becomes increasingly important, Everpure’s expanding solution set can help it take a larger share of the overall AI pie.
Revenues Soar, But Memory Chip Shortage Weighs on PSTG
Many parts of Everpure’s business are moving in the right direction. Revenue rose by over 20% in the latest quarter, exceeding estimates and having accelerated for five quarters in a row. Furthermore, Everpure’s midpoint revenue growth guidance of 19% for its full fiscal year 2027 exceeded estimates. The company has a large customer in Meta Platforms (NASDAQ: META) and is in talks to bring other hyperscalers in as clients.
However, memory chips are a key cost for the firm, and prices of these components have soared amid the ongoing shortage. As a result, Everpure faces margin uncertainty going forward. Next quarter, the firm sees its product gross margin coming in at the lower end of its typical range between 65% and 70%.
The company indicated confidence, saying it expects gross margins to improve through the rest of the year. However, it also noted that pricing visibility in the memory chip market is "non-existent." This leads to concerns that Everpure’s gross margin outlook may be overly optimistic.
Still, the firm is doing several things to fight back against surging memory costs. For example, it recently announced a 20% price increase, and didn’t rule out further hikes. Additionally, when hyperscalers work with Everpure, they purchase memory components directly from suppliers, limiting the company’s exposure to further price increases. Still, gross margin uncertainty was one of the key reasons Everpure's stock fell significantly after earnings despite the company’s strong growth.
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AI Demand: PSTG’s Double-Edged Sword
While AI demand is driving increased customer interest for Everpure, it has also led to a memory chip shortage, which is currently a headwind for the firm.
Everpure’s business clearly has momentum, and its potential to add more hyperscaler customers provides upside catalysts. Its move toward broader data solutions can also give it the ability to offer a more comprehensive suite of solutions as the AI revolution progresses.
Still, memory headwinds could result in further downward pressure on shares. Notably, the stock trades at a forward price-to-earnings ratio of approximately 26x, more than 10% below its three-year average of nearly 31x.
The MarketBeat consensus price target on Everpure sits near $94.50, a number that suggests the stock could rise by more than 50%. After Everpure’s earnings, the majority of analyst updates tracked by MarketBeat were price target hikes. However, in aggregate, the average price target among analysts was essentially unchanged, ticking up from $78.50 to $78.75. While substantially lower than the consensus target, this figure still implies strong upside potential of over 25%.
Overall, Everpure is far from a low-risk stock, but it is also one that has the potential to generate significant long-term gains as it converges data storage with data intelligence.
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