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Pure Storage (NYSE:PSTG) was in the spotlight on Tuesday as investment firm UBS downgraded the flash storage company, noting that increased competition could impact its valuation.
Shares fell 4.9% in premarket trading and have gained 88% year-to-date.
“Pure’s valuation has benefitted from the view that AI infrastructure investments will accelerate growth,” analyst David Vogt wrote in an investor note. “However, AI related storage spending will likely be slower than the [market] expects and more tied to inference, a slower growth market than training. Finally, private vendors like Weka, VAST Data, and Hammerspace are gaining share as evidenced by Meta’s announcement it is partnering with Hammerspace to co-develop and land a parallel network file system deployment in its GenAI clusters.”
Other competitors in the flash space, such as NetApp’s (NTAP) C-series, HP’s (HPQ) Alletra and others are expected to gain market share, leaving Pure Storage with roughly 15% of the market, below the 19% consensus estimate, Vogt added.
Vogt lowered his rating on Pure Storage to Sell from Neutral but raised his price target to $47 from $44.
Over the next five years, Pure Storage is likely to grow revenue at a compound annual rate of 8% Vogt added, compared to the consensus estimate of 12% and 16% over the previous five years.
Analysts are largely bullish on Pure Storage (PSTG). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates PSTG a HOLD.