On Wednesday, TD Cowen increased the price target of Seagate Technology (NASDAQ:STX) shares to $135 from the previous $110, while the firm maintained a Buy rating on the stock. The adjustment comes in response to the company’s guidance surpassing consensus expectations, signaling a positive outlook for the hard disk drive (HDD) market.
The analyst from TD Cowen noted that the early stages of Generation Artificial Intelligence (GenAI) are having a beneficial impact on HDDs, as more data is being stored. This trend is also indirectly supporting the expansion of data center construction.
The firm emphasized the continued pricing power of HDD original equipment manufacturers (OEMs), attributing it to their disciplined approach to capacity management, which has been instrumental in sustaining price increases.
Furthermore, Heat-Assisted Magnetic Recording (HAMR) technology was highlighted as a long-term technological thesis for the industry. Despite the price target revision, the forecast for Seagate’s fiscal year 2025 earnings per share (EPS) remains unchanged at $6.15. The new price target of $135 is based on a 21x multiple of the expected calendar year 2025 EPS.
Seagate’s positive guidance and the subsequent price target increase by TD Cowen reflect the underlying strength in the HDD market, driven by advancements in technology and growing data storage needs. The firm’s outlook suggests confidence in Seagate’s future performance and the broader HDD sector.
In other recent news, Seagate Technology experienced robust growth, as reflected in its financial results for the fourth quarter and fiscal year 2024. The company’s revenue surged by 18% year-on-year, reaching $1.89 billion in the June quarter, largely driven by a global increase in cloud demand. Seagate’s non-GAAP gross margin also outperformed, hitting nearly 31%, exceeding its long-term target.
These recent developments also include Seagate’s non-GAAP operating income standing at $327 million, and non-GAAP EPS of $1.05, surpassing the high end of its guidance range.
The company’s focus on profitability and cash generation resulted in a fortified balance sheet, ending the quarter with $1.4 billion in cash and cash equivalents and $2.9 billion in available liquidity.
Looking forward, Seagate plans to advance its mass capacity product roadmap, including the HAMR-based Mozaic 3+ product, and anticipates continued growth in nearline cloud and enterprise OEM markets. The company also expects mass capacity revenue to grow in the September quarter with projected revenue around $2.1 billion.
Despite experiencing some volume issues and supplier interactions that have slowed progress, Seagate remains optimistic about the demand for exabytes in the calendar year 2025 and is focused on introducing new products to meet customer needs. The company also sees potential growth in AI-driven applications and is in the early stages of exploring this area.
Following the price target increase for Seagate Technology by TD Cowen, current metrics from InvestingPro provide additional context for investors considering the stock. With a market capitalization of $22.11 billion and a notable presence in the Technology Hardware, Storage & Peripherals industry, Seagate stands out as a significant player. Despite analysts anticipating a sales decline this year, Seagate has demonstrated a strong return over the last year, with the stock price returning an impressive 83.74% as of the last twelve months. Additionally, the company’s commitment to shareholder returns is evident through its consistent dividend payments for 14 consecutive years, currently yielding 2.66%.
InvestingPro Tips also reveal that Seagate generally trades with low price volatility, which could appeal to investors looking for stability in their portfolio. Furthermore, the company is trading near its 52-week high, showcasing the market’s confidence in its performance. For those interested in further analysis, there are over 10 additional InvestingPro Tips available, providing deeper insights into Seagate’s valuation, profitability, and market trends. To access these exclusive tips and take advantage of real-time metrics, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
