Why Shares of Pure Storage Dropped Today

What happened

Shares of Pure Storage (NYSE: PSTG) slumped on Thursday after the company's fourth-quarter results were overshadowed by weak guidance. The stock was down about 11% at 2:40 p.m. EST.

So what

Pure Storage reported fourth-quarter revenue of $227.9 million, up 52% year over year and a few million dollars above the average analyst estimate. Pure Storage added 450 customers during the quarter, bringing its total customer count to 3,000. Notable customer wins include video-streaming company Hulu and restaurant chain Subway.

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Image source: Pure Storage.

Non-GAAP EPS came in at a loss of $0.02, up from a loss of $0.12 during the prior-year period and $0.06 higher than analyst expectations. The company lost $42.9 million, or $0.21 per share, on a GAAP basis, a slight improvement compared to the prior-year period.

While Pure Storage continued its streak of revenue and earnings beats, the company's guidance for the first quarter was disappointing. It expects to produce revenue between $171 million and $179 million, up just 25% year over year at the midpoint and well below analyst expectations of $201.7 million.

Now what

Pure Storage expects to produce $1 billion of revenue this year, right in line with the average analyst estimate, but the weak first-quarter guidance will require growth to pick up as the year goes on. CEO Scott Dietzen sees opportunities going forward:

Shares of Pure Storage are now down about 50% since peaking soon after the company's IPO in late 2015. With growth expected to slow during the first quarter, and with profitability nowhere in sight, investors are clearly losing patience.

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Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.