2024 is heading into its final stretch, and it’s natural now to try to figure out what trends will support the stock markets going forward. One key factor that we can’t ignore is the continuing boom in artificial intelligence.
Advances in AI technology have boosted the tech sector generally – but those gains have been especially strong in AI-related stock segments such as semiconductor chips, data center services, and data storage.
The last in particular deserves a closer look. Data is a main beneficiary of AI technology – AI requires enormous amounts of data storage to support even basic machine learning applications, and data center and server stack providers have been seeing a surge as AI has expanded. And this is opening up opportunities for tech-minded investors.
Covering the data sector for Oppenheimer, analyst Param Singh is flashing ‘Buy’ signals on two specific data storage stocks. We’ve used the TipRanks database to find out what the rest of the Street has to say about his picks. Let’s take a closer look.
Pure Storage (PSTG)
First on the list is Pure Storage, a company which, as its name suggests, is a specialist in data storage technology. Pure Storage offers what it describes as ‘simple and sustainable’ solutions for data storage, relevant and scalable to nearly any application. The key to the company’s success is giving customers a single platform for all their data storage needs, with a unified infrastructure – at a time when computer systems are fragmented, and not always compatible with each other, this presents a huge advantage.
In addition, Pure Storage’s data platform is designed to grow along with the customer’s business. The company has made data storage available with the popular as-a-Service subscription model, allowing users to have greater control over their budget, their data capabilities, and even their operating costs and energy bills.
In addition to its subscription service, Pure Storage also offers top-quality lines of data storage memory chips and flash storage arrays, designed to offer efficient operations at any scale, for small businesses to server-heavy data centers.
In its most recent earnings release, covering fiscal 2Q25, the company reported a top line of $763.8 million, gaining 11% year-over-year and beating the forecast by $7.74 million. At the bottom line, the company’s 44-cent non-GAAP EPS was 7 cents better than had been expected.
Looking at the prospects for this company, Oppenheimer’s Singh sees plenty of reason for optimism, and he sums them up clearly: “Our bullish stance is predicated upon our view that Pure Storage is: (1) a beneficiary of rising creation and storage of unstructured data that is used to build and deliver AI applications; (2) a long-term share gainer in the all-flash array (AFA) market, where it has a technological advantage; and (3) a leading provider of storage-as-a-service (STaaS) offerings, and will benefit from the industry shift to as-a-service platforms. We believe these drivers will result in strong new customer additions, existing customer expansion activity, and continued operating margin improvement.”
The analyst’s ‘bullish stance’ leads naturally to an Outperform (i.e. Buy) rating, and his price target of $70 points toward a one-year gain for the stock of nearly 40%. (To watch Singh’s track record, click here)
The Moderate Buy consensus rating here is based on 18 recent reviews with a breakdown of 11 Buys, 5 Holds, and 1 Sell. The shares are trading for $49.87 and their average price target of $65.47 implies an upside potential of 31% on the one-year horizon. (See PSTG stock forecast)
Commvault Systems (CVLT)
As AI applications and their related data services expand, users are going to start focusing more and more on data security. This is especially important as cloud computing and other subscription services expand – with more and more data put on cloud or third-party servers, maintaining secure access and preventing breaches will become more urgent. Commvault is a software company that exists squarely in the data protection niche; the company offers subscribers a cloud-based platform to secure data, no matter where it is stored.
The company’s platform supports a wide range of functions, including continuous data security, with risk scanning, threat hunting, and compliance features; continuous reading, including air gapping, early warning, and recovery testing; and continuous recovery, with features to allow for forensic recovery, backups, and cloud recovery. Commvault’s data security solutions are applicable across much of the digital world, and customers of all stripes can access comprehensive data protection, backup, management, and compliance in any work or server environment.
The company’s recent numbers show just how much demand there is for data security, especially on and for the cloud. As of September 30 this year, Commvault had a total annual recurring revenue (ARR) of $853 million, up 20% year-over-year; this included $687 million in subscription-based ARR, which was up 30% year-over-year. The company’s SaaS ARR was growing even faster; while it only brought in $215 million in ARR, that was up 64% from the prior year. Commvault’s free cash flow grew 25% y/y, and reached $98 million.
Those numbers come from the fiscal 2Q25 period, which was reported at the end of October. The headline numbers for the quarter were sound – revenues came in at $233.3 million, beating the forecast by $12.42 million and growing just over 16% year-over-year, and earnings, as a non-GAAP EPS, were reported as 83 cents per share, 7 cents per share better than had been anticipated. We should note here that CVLT shares have been on a tear this year – the stock is up 146% year-to-date.
A combination of leading position and sound prospects has Singh upbeat here. The Oppenheimer analyst says in his recent note on the stock, “Our bullish stance is predicated upon our view that Commvault is: (1) a beneficiary of the rising importance of data, which is driving backup storage TAM; (2) is benefiting from growing data security breaches and ransomware attacks that are creating new revenue opportunities; and (3) a leading provider of BaaS and DRaaS offerings, and will benefit from the industry shift to as-a-service platforms. We believe these drivers will result in strong new customer additions, existing customer expansion activity, continued market share gains, and 35%-40% SaaS ARR growth over the next three years.”
Once again, we see that a ‘bullish stance’ leads to an Outperform (i.e. Buy) rating from Singh. The analyst’s price target here, at $200, suggests that CVLT has a gain of 13% in the offing for the coming year.
The 6 recent analyst reviews on CVLT are evenly split, with 3 Buys and Holds, each, giving it a Moderate Buy consensus rating. However, the stock’s $175.50 average price target suggests the shares will stay rangebound for the time being. (See CVLT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
