Pure Storage, Inc. (PSTG) shares rose more than 5% during Wednesday's session after Raymond James upgraded the stock from Market Perform to Outperform and raised its price target to $22 per share – a 20% premium to the opening price for the day. Analyst Simon Leopold's channel checks suggest that sales have continued to grow at a double-digit pace and may outperform current estimates.
The comments come shortly after Goldman Sachs upgraded the stock to Buy from Neutral and issued a $21 price target on the stock on Oct. 10. Morgan Stanley and Piper Jaffray also have price targets of $21 on Pure Storage stock since the company's investor event in mid-September showed continued market share gains, new offerings that could improve visibility, and a 140% net retention rate. The company's next quarterly earnings date is Nov. 18, 2019, when investors could see the next big catalysts.
From a technical standpoint, the stock broke out from its 200-day moving average at $17.97 to retest reaction highs of around $18.50 in mid-September. The relative strength index (RSI) rose toward overbought levels with a reading of 66.48, but the moving average convergence divergence (MACD) experienced the start of a bullish crossover. These indicators suggest that the stock could consolidate before moving higher.
Traders should watch for a breakout from trendline resistance before experiencing consolidation above the new support level. If the stock continues its move higher, traders could see a move to close the gap dating back to late May at around $20 per share. If the stock fails to break out, traders could see a move back down to the 50-day moving average and trendline support near $16.10 per share – although momentum has turned bullish.
The author holds no position in the stock(s) mentioned except through passively managed index funds.