Analyst Wamsi Mohan from Bank of America Securities reiterated a Buy rating on Seagate Tech (STX – Research Report) and increased the price target to $110.00 from $100.00.
Wamsi Mohan’s rating is based on a confluence of positive indicators within the hard disk drive (HDD) industry and Seagate Technology’s specific operational trajectory. Despite a delay in the ramp-up of Heat-Assisted Magnetic Recording (HAMR) technology, which has led to some pushouts, Mohan notes that the company has reaffirmed its guidance for F3Q24, staying in line with revenue estimates and slightly below earnings per share (EPS) expectations. There is optimism for modest upside potential due to recovering nearline demand. Furthermore, the secular trend of increasing Cloud storage requirements, coupled with revenue and margin improvements from current low levels, supports a strong outlook for Seagate’s higher capacity HAMR HDDs.
The industry is showing signs of structural improvement, with preliminary data from C1Q24 suggesting a resurgence in HDD demand, evidenced by the first year-over-year growth in Exabyte shipments since mid-2022. Going into F4Q24, Mohan anticipates a cyclical recovery with consequent pricing and margin benefits, fueled by reviving Cloud capital expenditures, notably from Google. This recovery is expected to drive double-digit exabyte growth and modest price increases across different segments. The continued focus on capital allocation, including maintaining dividends and reducing debt, underlines Seagate’s strong financial management, reinforcing the Buy rating with a price objective of $110.
Mohan covers the Technology sector, focusing on stocks such as Apple, Amphenol, and Western Digital. According to TipRanks, Mohan has an average return of 9.6% and a 54.72% success rate on recommended stocks.
In another report released on April 9, Mizuho Securities also maintained a Buy rating on the stock with a $100.00 price target.
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Seagate Tech (STX) Company Description:
Seagate Technology Plc engages in the development, production, and distribution of data storage products and electronic data storage solutions. Its products include hard disk drives, solid state hybrid drives, solid state drives, peripheral component interconnect express cards, serial advanced technology attachment controllers, storage subsystems and computing solutions. It offers its products under the Backup Plus and Expansion product lines, and Maxtor and LaCie brands. The company was founded by Finis Conner, Syed Iftikar, Doug Mahon, David Thomas Mitchell, and Alan F. Shugart in 1978 and is headquartered in Dublin, Ireland.
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