Pure Storage (NYSE:) shares dropped greater than 5% forward of the market open on Tuesday after UBS analysts downgraded the inventory from Impartial to Promote.
The transfer comes as UBS sees an unfavorable risk-reward profile for the flash information storage options supplier attributable to slowing progress, declining market share, elevated valuation, and “an excessive amount of credit score given to AI.”
Analysts anticipate PSTG’s progress to decelerate to round 8% over the subsequent 5 years, a notable lower from the 16% progress price noticed within the earlier 5 years. The agency anticipates the corporate’s share of the all-flash storage market to plateau round 15%. furthermore, UBS’s income forecasts for fiscal years 2026 and 2027 are 6% and 10% under consensus, respectively.
The downgrade additionally takes under consideration a drop in market share, with Pure’s final twelve months’ share of the all-flash storage market falling by roughly 80 foundation factors to 14.5% “as new choices like NetApp’s C-series have more and more resonated with enterprise clients,” analysts famous.
As for its valuation, UBS highlighted that the inventory has surged by roughly 83% year-to-date, outpacing the S&P 500’s 15% achieve considerably. This rise comes regardless of a 1% drop in income expectations for fiscal years 2025 and 2026.
Lastly, analysts word that views that AI infrastructure investments will spur PSTG’s progress have boded properly for PSTG’s valuation, nevertheless, “AI-related storage spending will possible be slower than the market expects and extra tied to inference, a slower progress market than coaching,” they mentioned.
“Lastly, non-public distributors like Weka, VAST Information, and Hammerspace are gaining share as evidenced by Meta’s announcement it’s partnering with Hammerspace to co-develop and land a parallel community file system (NFS) deployment in its GenAI clusters,” they added.
Alongside a downgrade, analysts barely lifted their worth goal on PSTG shares from $44 to $47.
