August 31, 2018 | 2:31 PM by Fahad Khalid |

Pure Storage (PSTG) – HDD -> Flash Array Growth

It pays to do fundamental research. This bullish view was first presented in the JaguarWebinar on August 9 with a recommendation to buy November 22.5 call options for $2.50. After earnings on August 21, the stock ripped higher and the calls were closed for $4.00 (+60% gain)! To learn more about our approach and how you can become a successful trader, sign up for a 4-week trial and test drive the JaguarLive chat room: SUBSCRIBE

August 22

Pure Storage (PSTG) – Boom! Ripping higher by +14% in pre-market. Expected to open near 52-week high which is $25.62. We covered the highlights in First Read. Here are finer details you should know.

— During the first 6 months of 2018 revenue growth was +39%. Management’s guidance for rest of year is +33%. Conservative given company is uniquely positioned and it is pure play on fastest growing storage market of All-Flash with tailwinds from newer applications like NVMe and Artificial Intelligence (AI).

— In earnings conference call, management highlighted there is big lack of an existing installed base. Meaning, nobody really has commanding market share, its all for taking and PSTG is making sure it gets the most of it because it is pure play.

— Flash Array uses NAND as raw material and NAND pricing is coming down (which is why I’ve been cautious on LRCX and MU). Falling input prices improves margin for PSTG which posted +70 bps overall GM expansion. Product GM expanded by +150 bps.

August 9

Pure Storage (PSTG) Bullish discussion ahead of August 21st earnings.

Click here to listen to the recorded webinar discussion. 

Technically price has been following long-term uptrend line and is now near the bottom of the channel with MACD turning up, a small amount of calls being bought today to support the target of $24.50, could hit $26.50. Channel checks from Stifel today showing strong June sales, 93% of resellers responding to survey mentioned sequential growth QoQ. All-flash-array is seeing significant growth replacements of HDD drives) is the key reason of these gains. Partnerships with Cisco (CSCO) and Nvidia (NVDA)  continue to remain robust, as per CEO commentary.

Trade idea is to buy November 22.5 calls for $2.50 or less.


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