Evaluating Pure Storage After Recent 20% Pullback and AI Storage Growth Hopes

• Wondering if Pure Storage at around $70 a share is still a smart buy or if the real upside is already priced in? Let us unpack what the market is paying for and whether that lines up with the company’s long term story.
• The stock has been volatile lately, with a sharp pullback of about 20.5% over the last week and 21.8% over the past month. It is still up 12.7% year to date and 10.4% over the last year, and has surged 136.3% over three years and 226.1% over five.
• Recent headlines have focused on Pure Storage’s position in flash storage and data infrastructure, along with growing investor interest in how its platform fits into AI and cloud workloads. At the same time, shifting risk sentiment around high growth tech and changing expectations for IT spending have added extra volatility to the share price.
• On our numbers, Pure Storage scores a 3/6 valuation check score. This means it screens as undervalued on half of the key metrics we track. We will walk through what that actually means, how different valuation methods view the stock, and why there might be an even more insightful way to think about value by the end of this article.

Find out why Pure Storage's 10.4% return over the last year is lagging behind its peers.

Approach 1: Pure Storage Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth by projecting its future cash flows and then discounting them back to today, using a rate that reflects risk and time.

Pure Storage generated trailing twelve month Free Cash Flow of about $563.7 million. Analysts expect this to rise steadily, with projections reaching around $605.5 million in 2026 and $987.99967 million by 2028, before extrapolated estimates push Free Cash Flow to roughly $1.26 billion in 2030. These later years are based on Simply Wall St extending analyst forecasts rather than direct consensus numbers.

When those projected cash flows are discounted back to today using a 2 Stage Free Cash Flow to Equity model, the resulting intrinsic value comes out at roughly $76.11 per share. Compared with a current share price around $70, the DCF implies the stock is about 7.5% undervalued, which is a modest gap rather than a deep bargain.

Result: ABOUT RIGHT

Pure Storage is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Pure Storage.

Approach 2: Pure Storage Price vs Sales

For a fast growing, still maturing tech business like Pure Storage, the Price to Sales ratio is often a better yardstick than earnings based multiples, because revenue is less distorted by accounting items and investment in growth.

In general, higher expected growth and lower perceived risk justify a higher Price to Sales multiple, while slower growth or greater uncertainty argue for a lower one. Pure Storage currently trades at about 6.64x sales, which is well above both the broader tech industry average of roughly 1.67x and its peer group average of around 2.28x.

Simply Wall St’s Fair Ratio framework refines this comparison by estimating what multiple a company should trade on given its specific growth outlook, margins, size and risk profile. For Pure Storage, that Fair Ratio is 11.90x sales, which suggests the stock currently trades below the level indicated by this framework. Because this approach factors in company specific drivers rather than just simple peer comparisons, it provides a more nuanced view of value.

Result: UNDERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1452 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Pure Storage Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simple, story driven forecasts you create on Simply Wall St’s Community page by linking your view of Pure Storage’s business drivers to concrete assumptions for future revenue, earnings and margins. This turns that story into an explicit fair value you can compare with today’s share price to decide whether it looks like a buy or a sell. The Narrative then updates dynamically as new news or earnings arrive. For example, one investor might build a bullish Pure Storage Narrative around accelerating AI storage demand, hyperscaler wins and sustained high growth that supports a fair value closer to the upper end of recent targets. A more cautious investor might focus on execution risks in the cloud transition and competition to arrive at a fair value nearer the lower end, with both perspectives visible side by side for you to benchmark your own view.

Do you think there's more to the story for Pure Storage? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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