© Reuters Pure Storage offer best-in-class products, Super Micro Computer expectations at risk – Wedbush
By Sam Boughedda
Wedbush analysts upgraded Pure Storage, Inc. (NYSE:) to Outperform and downgraded Super Micro Computer (NASDAQ:) to Underperform on Thursday.
The move in ratings was out down to the fundamental prospects of both firms vs. expectations and valuations on an absolute basis, with the two companies “having significantly different business models.”
The analysts said in their note that PSTG “continues to offer best-in-class products as illustrated by its margins.”
“Management’s guidance largely de-risks the forward outlook for continued macroeconomic weakness with PSTG’s outlook assuming a regression to well below historical growth trends arguably correcting for recent outperformance (and difficult comps),” they added.
Meanwhile, for SMCI, he believes the slower roll-outs of new CPUs and softer hyperscale/enterprise spend “create a risk to expectations for a rapid recovery in revenues post CQ1.”
“Recent gross and operating margin improvements and wins at larger customers are not structurally sustainable through the intermediate/longer term,” wrote the analysts. “If margins aren’t sustained, or revenue growth doesn’t rebound sharply (as per our model), SMCI’s valuation appears stretched vs. historical norms.”
