Shares of Pure Storage (PSTG 4.11%) were on the rise today, up 6.4% as of 2:06 p.m. EST. The company, which makes storage-related software and hardware for enterprise, hybrid, and cloud-data centers, got a lift today after rival NetApp (NTAP 0.15%) reported better-than-expected earnings and guidance last night.
Pure Storage will report after market close today, so investors may be trying to get in ahead of more good news.
NYSE: PSTG
Key Data Points
NetApp impresses
The enterprise-storage industry has been in a bad slump for the past year to 18 months; however, NetApp's better-than-feared results and guidance for some quarter-over-quarter improvements seem to indicate the industry is troughing and may be turning up.
For the quarter, NetApp's revenue declined 6% to $1.56 billion, but the company's adjusted (non-GAAP) earnings per share (EPS) actually turned up 6.8% to $1.58 thanks to cost management and profit expansion. Both figures came in better than expected according to Wall Street analyst estimates. In addition, NetApp guided to revenue between $1.51 billion and $1.67 billion, and adjusted EPS between $1.64 and $1.74 in the current quarter. The midpoints of both guidance figures indicate quarter-over-quarter improvements.
That indicates the data-center storage business, which went into a slump in 2022 that extended into this year as businesses cut back spending, may be troughing and turning back up. That would be a positive for Pure Storage as well. So while NetApp soared more than 15% today as of this writing, Pure Storage also rose but by a lesser amount.
Of course, we will find out if NetApp's better-than-expected performance translates. After all, NetApp's outperformance could be coming at the expense of Pure Storage, as the two compete vigorously in data-management software in various storage environments. In fact, there is an entire page on NetApp's website that shows all the ways it believes its offerings are superior specifically to Pure Storage's.
NetApp is the bigger of the two, with a market cap of $18.8 billion and revenues of $6.2 billion over the past 12 months, while Pure Storage's market cap is $11.9 billion with revenues of $2.8 billion. That being said, Pure Storage has shown slight growth as of late, while NetApp has showed modest declines. So it appears Pure Storage has been taking a little bit of market share in recent years.
Are these storage plays right for your portfolio?
These two companies are both modestly priced ways to play the growth of enterprise data, which should see tailwinds going forward but will also see some cyclicality every few years. So even if neither is the most exciting stock in the tech sector, both could be strong additions to a value investor's technology allocation. Currently, NetApp trades for about 15.7 times its current-year earnings estimates (ending in April), while the higher-growth Pure Storage trades at 27.2 times this year's earnings estimates (ending in January).
