We came across a bullish thesis on Pure Storage, Inc. (PSTG) on Substack by Magnus Ofstad. In this article, we will summarize the bulls’ thesis on PSTG. Pure Storage, Inc. (PSTG)’s share was trading at $49.22 as of March 7th. PSTG’s trailing and forward P/E were 158.77 and 28.90 respectively according to Yahoo Finance.
The market’s reaction to Pure Storage (PSTG) has been severe, with shares plummeting from $70 to $50 in just a month, despite solid Q4 earnings. The key driver behind this decline is weaker-than-expected guidance for fiscal year 2026, with projected revenue growth of 11% and a non-GAAP operating margin of 17%. While these numbers indicate some deceleration, they do not justify the extent of the sell-off, which has been exacerbated by broader market fears under Trump 2.0. Defensive sectors like healthcare and retail are benefiting, while growth stocks, particularly in tech, are under pressure. However, this shift presents a compelling opportunity in high-quality names like PSTG, which remains fundamentally strong.
PSTG has successfully transitioned to a platformization model, driving a 21% year-over-year increase in annual recurring subscription revenue. Total revenue grew by 12%, and the company continues to expand its customer base, adding 334 new clients last quarter. This subscription-driven strategy provides strong revenue visibility, reinforcing the company’s resilience even amid macroeconomic headwinds. Despite conservative guidance, Pure Storage’s long-term growth trajectory remains intact. The shift towards AI-driven workloads and cloud data infrastructure should continue to fuel demand for its storage solutions, providing a structural tailwind that the market appears to be discounting.
With the recent decline, Pure Storage is now trading well below its intrinsic value. While many Wall Street analysts anticipate revenue growth to accelerate after 2026, a more cautious outlook suggests steady growth slightly above 10%. Factoring in the softer guidance, the revised fair value estimate stands at $62, indicating substantial upside from current levels. The market’s exaggerated reaction has created an appealing opportunity for long-term investors, given PSTG’s strong margins, expanding subscription revenue, and loyal customer base. As economic uncertainty eases and sentiment improves, the stock is well-positioned for a significant re-rating, making it an attractive bet in the data storage sector.
Pure Storage, Inc. (PSTG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held PSTG at the end of the fourth quarter which was 31 in the previous quarter. While we acknowledge the risk and potential of PSTG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PSTG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.