Data-storage company Pure Storage (PSTG 1.40%) fell as much as 18.3% in trading Thursday after reporting fiscal third-quarter 2024 financial results. Shares closed the day down 12.2% and were steady most of the day.
The quarter and Pure Storage guidance
It wasn't the quarterly results investors were disappointed in. Revenue was up 13% from a year ago to $762.8 million and beat analyst estimates of $761 million. Earnings of $0.50 per share were also ahead of the $0.40 that was expected. Management also said remaining performance obligations were up 30% to $2.0 billion.
But guidance was a different story. Management expects $782 million in revenue and non-GAAP operating income of $150 million for the fourth quarter of fiscal 2024, and analysts were looking for $919 million in revenue.
Pure Storage is priced for perfection
A $10.4 billion market cap has investors considering how much growth Pure Storage can actually deliver. Despite increasing demand for data storage overall, the company said growth is slowing in Q4, although margins are expanding.
I think we're simply seeing a correction in expectations by the market. Pure Storage is still profitable and growing, but if the pace of growth is slower than investors were expecting, we can see stocks fall rapidly. That's what happened to Pure Storage today. Shares are still expensive at nearly four times fiscal 2024 revenue guidance of $2.82 billion and 23 times non-GAAP operating-income guidance of $450 million. But if growth picks up or the stock continues to fall, this could be a good value for investors.