AI memory and storage companies have been generating massive revenue and earnings growth recently, and their stocks have been posting huge returns as a result.
The big names like Micron, Sandisk, Western Digital, and Seagate have had returns well into the triple-digit percentages this year. Sandisk, for example, is up 614% year to date. That's a better return than a lot of great stocks get over 10 years, let alone nine months.
While these chip stocks and hard-drive makers have attracted a lot of attention, and for good reason, some memory stocks have largely been flying under the radar. One of them is Everpure (P +0.45%) -- which was relatively quiet until about a month ago when it was announced that it would be added to the S&P 500. Since then, it has taken off.
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The S&P 500 bump
Everpure officially joined the S&P 500 on Sept. 21, and since then, it has skyrocketed 46% to $152 per share. Since Sept. 4 -- the day its pending addition to the index was announced -- it's up 53%. The stock is also up by about 127% year to date.
Its inclusion in the S&P 500 reflects its significant growth in recent years, but also raises the profile of the stock. Everpure now must be added to massive S&P 500-focused exchange-traded funds (ETFs) such as the $1 trillion Vanguard S&P 500 ETF. That brings a ton of new assets to Everpure.
NYSE: P
Key Data Points
Flash storage technology
Companies specialize in different areas within the memory and storage industry. Everpure's niche is enterprise storage for AI and cloud computing workloads for data centers and other applications.
But Everpure does things a little differently than its competitors. Its flash storage systems, FlashArray and FlashBlade, run on its proprietary Purity operating system. Flash technology offers the benefits of being fast, rewritable, and able to retain stored data even when the power is off. But Everpure also touts its wares as offering better storage density and lower energy use than those of its peers.
In its fiscal 2027 second quarter, revenue jumped 38% year over year to $1.2 billion. Since it sells both the flash array devices and the software to manage the data, it books both product revenue, which was up 54% year over year, and subscription revenue, which grew by 20%. Its annual recurring revenue from subscriptions was $2.1 billion, up 20% year over year. Further, its earnings jumped 57% to $0.22 per share.
A memory player worth watching
In the fiscal Q2 report, Everpure raised its revenue growth guidance for the fiscal year to between 37% and 38%, up from 20% to 23%, and boosted its forecast operating income growth rate to between 48% and 51%, up from 29% to 36%. In addition, it has a bulging backlog with remaining performance obligations of $4.1 billion, up 44% year over year.
Everpure stock is a tad expensive, trading at 150 times earnings and 44 times forward earnings. That would make me a bit nervous, considering there are other memory stocks out there that are cheaper. The recent 42% jump has certainly raised its valuation, but it was high before that.
While Wall Street is bullish on the stock, with 86% of covering analysts rating it as a buy, their median price target is just $150 per share, which is basically where it is now. I'd expect to see the stock price settle a bit, not because of any lack of growth, but due to its valuation. Still, it's definitely one to keep on your watch list.
