Data Storage

Stocks are on sale, thanks to Trump!

This week, we will revisit Dell, Pure Storage, and Netapp. I will not discuss these companies in depth since I have covered them extensively earlier. If you wish to learn more about them, you can check out my earlier writings or read about them directly on their company websites. Before we delve into their relative valuations, I will give you some tactical considerations about the market.

Tactical considerations

Trump 2.0 has so far entailed a hard reckoning. His presidency started with a lot of market optimism. Investors piled into names with high revenue growth and sold out of companies with lower growth. Six weeks into his presidency, everything has changed on a dime. Defensive sectors such as retail and healthcare are the winners, while growth stocks get punished.

I closely monitor the pharmaceutical sector, and rest assured, there are still some attractive investment opportunities available. However, I also recognize that some companies I have recommended earlier, such as AbbVie, Gilead Sciences, and Amgen, have seen significant price increases, bringing them near my estimated fair value. As a result, the potential upside in these stocks appears more limited. From a tactical standpoint, I suggest exploring sectors that have experienced excessive sell-offs. Fortunately, the data storage companies we're focusing on today present compelling value, as they are substantially undervalued.

The question is how much growth stocks can fall, and we are talking about tech companies for the most part. Much depends on how long the Trump uncertainty lasts. The tariff policy is especially damaging to confidence. I expect the Trump administration to dial back this policy fairly soon. 25% tariffs on goods from Mexico and Canada are simply too mad. Supply chains are intertwined across the North American continent and will hurt manufacturing output and consumption across all three countries. We are, for example, talking about a price increase of $10,000 on a truck produced by General Motors in the dealerships. Nobody is willing to pay such prices, it will be a shock that consumers need a long time to grow accustomed to. When all is said and done, I don’t believe the Trump administration wishes to deliver such a hard reset to the American economy. The result will most certainly be a nasty recession.

While it's speculative, I predict a shift towards more cautious policies soon. If this occurs, it could lead to a recovery in recently devalued assets.

Pure Storage

Hard to believe that this $50 stock was $70 one month ago. Q4 earnings were fine, although guidance wasn’t as strong as many bargained for. However, a 30% drop goes far beyond what’s justified. It’s all thanks to Trump.

One year ago, PSTG shifted to a platformization model to grow subscription revenue. This strategic shift has worked like a charm. Annual recurring subscription revenue grew 21% last year. Total revenue grew by 12%, and the non-GAAP operating margin was 17,4%. PSTG gained 334 new customers last quarter.

As stated earlier, PSTG delivered weak guidance for the fiscal year 2026: revenue growth is expected to decelerate to 11%, and the non-GAAP operating margin will come in at 17%. Due to the weak guidance, I adjust my fair value estimate to $62 from $65. My price target is below that of the majority of Wall Street analysts, and I believe the reason for this disparity is that I don’t project revenue growth to accelerate up to 14% from fiscal year 27. Instead, I predict revenue growth will hold steady just above 10%. In any case, PSTG trades currently well below its intrinsic value.

Netapp

Earlier, I warned about investing in NTAP, calling the stock overvalued when the stock price stood above $130. Today, NTAP is slightly undervalued as it has sold off in tandem with the rest of the market.

NTAP’s Q3 earnings came in more or less as expected. The EBIT margin was higher than my projections, but not so much that I revise my $100 fair value estimate. Presently, I think NTAP’s revenue growth is too weak. A 2% revenue growth is not going to cut it.

Dell Technologies

DELL separates itself from the two businesses mentioned above because only a small portion of its sales consists of flash memory storage. DELL is a wholesaler of various technological equipment. Still, I lump it in with them since server sales are the fastest-growing part of DELL’s business.

DELL finished the fiscal year 2025 as expected. Revenue growth was 8%, and the operating margin was 15%. Commercial PC sales grew by 5% while traditional servers grew by double digits. The demand for flash memory storage was up to double digits, and the shipment of AI-optimized servers is projected to accelerate further.

Many complained that DELL delivered weak guidance, and the shares dropped after earnings. This doesn’t mean much since the Trump debacle sent the shares down more than 10% in the last week. DELL guides steady as it goes next year. Revenue growth is expected to stay around 8%, and the operating margin is projected to shrink by 1% to 14%. This was a little weaker than what I had penciled in, therefore, I take my fair value estimate down by $10 to $140. Thus, DELL comes in as massively undervalued despite the downgrade. DELL is good quality. Cash flow is good. Consistent buybacks cut the share count, and dividends grow steadily.

Conclusion

Currently, I have a small position in PSTG. However, DELL is more undervalued right now. DELL is also more tempting than PSTG from a capital return perspective. In a longer perspective, PSTG might have a stronger business model since such a large part of its business is built on recurring revenues, making it more robust than DELL during cyclical downturns. So, it's not all that clear-cut. Anyways, I am contemplating swapping my position. What is certain, however, is that Trump needs to calm the heck down. If not, nothing is going to work in the next months. Investors that are interested in the sector might also take a look into Hewlet Packard Enterprise (HPE). I expect HPE to be undervalued as well, and the business has a good reputation in the market.

Disclaimer: Important Information for Retail Investors

The information in this blog is for educational purposes only, not financial advice. Investing in stocks carries risks; past performance doesn't guarantee future results. Conduct thorough research and seek advice from financial professionals before investing.

The author is a retail investor, not a licensed advisor. Due to changing market conditions, content accuracy isn't guaranteed. All investments have risks, including the potential loss of principal. Assess your risk tolerance and goals before investing; diversification is key to managing risk.

The author may have positions in the mentioned stocks, which can change without notice. Readers should do their due diligence and consult professionals before acting on blog information.

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