Shares of Pure Storage (PSTG 6.45%) slumped on Thursday after the stock received an analyst downgrade and a lower price target. At 1 p.m. EDT, Pure Storage stock was down about 13.5%.
Morgan Stanley downgraded shares of Pure Storage from "overweight" to "equalweight," lowering its price target from $17 per share to $12 per share. Morgan Stanley cited increased competition and slow uptake of Pure Storage's new products as the main takeaways from channel checks. Competition in the low end and middle portions of the market was a major concern.
This downgrade comes after an unbroken string of revenue and earnings beats since Pure Storage went public in 2015. Revenue growth has slowed, up 51.7% during the fourth quarter compared 92.7% in the second quarter, and the company's guidance for the first quarter fell far short of analyst expectations. The issues cited by the analyst may have something to do with Pure Storage's lackluster outlook.
Pure Storage will report its first-quarter results on May 24. The company expects to produce revenue between $171 million and $179 million, up just 25% year over year at the midpoint. That represents a dramatic slowdown that the company will need to explain.
Analyst upgrades and downgrades are often safe to ignore, although this downgrade from Morgan Stanley raises some legitimate concerns regarding Pure Storage's slowing growth. Investors will learn more next week when Pure Storage reports earnings.