#1 Overlooked Stock in 2024 AI Race to Buy and Forget

In December, the market punished Pure Storage (NYSE: PSTG) for short-term accounting implications affecting its stated metrics and company growth. Stock seems like a good value. Pure Storage has grown by over 50% in 2024, although Micron has been the frontrunner on artificial intelligence (AI) system digital memory demands. Does it still a good long-term set-it-and-forget-it buy?  

Pure Storage is a subscription AI memory bet. Pure Storage faces Dell and HPE in the data center and enterprise server market. NetApp's subscription data storage approach resembles Pure Storage's. Pure Storage focuses on high-performance, flash-memory-based server storage, while these other firms offer a wider range of computational and memory technology.  

While majority of its hardware is used outside of generative AI, Pure Storage's high-performance products are part of this vibrant next-gen data center ecosystem. The company's significant software capabilities on its platforms are also unique. Storage as a subscription service, including new hardware, is possible with its flagship Evergreen//One subscription.  

The rapid growth of these recurring subscription payments was one reason investors were bearish on Pure Storage stock late in 2023. Pure Storage's rising subscription revenues were stifling revenue growth last year since subscription purchases are recognized over time, unlike outright storage device sales. Sales grew 3% in fiscal 2023 due to this short-term effect.  

Pure Storage stock has risen in recent months due to the updated fiscal 2025 projection. Management forecasts double-digit sales growth, with full-year estimate at 10.5%. This suggests a slower start to the year, followed by a second-half acceleration to over 10% growth.  

It's not the fastest-moving AI stock. The prospect of a continuous subscription-based revenue stream from the wild data-center-memory hardware market makes it a unique investment.

As it grows, the business is making good operational profits. On $790 million in revenue, their GAAP operating margin was 7% in Q4 2024. Adjusted operating margin was 20%. Management anticipates these rates of return to rise as the company grows.  

Pure Storage trades at 35 times this year's anticipated GAAP EPS, so it's not a steal. In the next decade, enterprises' data storage needs will grow, especially for higher-performance storage due to AI. Pure Storage may be a good bet on a slow rise in this sector without the boom-bust cycles of memory chipmakers like Micron. I'll like my Pure Storage job for years.  

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