Yahoo Finance Seagate (STX) Up 58.2% in the Past Year: Will the Rally Last?
Seagate Technology Holdings plc STX is witnessing strong momentum, with shares having rallied 58.2% in the past year compared with the S&P 500 Composite’s 27.7% growth.
Headquartered at Dublin, Ireland, Seagate is a leading provider of data storage technology and infrastructure solutions. The company’s primary product offering is hard disk drives or hdds but it also develops other electronic data storage products such as SSD (solid state drive) and storage subsystems.
At present, the stock carries a Zacks Rank #2 (Buy).
Apart from a favorable rank, STX has a VGM Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 (Strong Buy) or 2 and a VGM Score of A or B offer solid investment opportunities.
The stock is down 5% from its 52-week high level of $101.26, making it relatively affordable for investors.
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Growth Factors
STX’s performance is driven by mass capacity demand improvement due to higher nearline cloud demand.
In the last reported quarter, total sales improved 6% sequentially, driven by stronger nearline cloud demand, which offset seasonal declines in the VIA market. Nearline cloud revenues grew owing to higher sales to cloud customers across the United States and China coupled with steady enterprise demand.
On a sequential basis, mass capacity revenues (71.3% of total revenues) increased 11% to $1.180 billion in the last reported quarter.
Management expects secular trends and innovations in driving up aerial density to benefit mass capacity storage. Seagate also noted that the launch of Mozaic 3+ hard drive platform, which features Heat-Assisted Magnetic Recording technology, positions it well to benefit from megatrends like AI and machine learning. This is likely to boost demand for mass capacity storage solutions over the long term.
STX expects incremental improvements in mass capacity demand in fiscal fourth quarter, especially nearline cloud products and nearline enterprise, and an uptick in demand in VIA markets.
For VIA, management projects demand to trend higher throughout 2024 with smart cities being the biggest end-market opportunity. For legacy and non-HDD markets, STX suggests performance to be at a similar level in the June quarter.
As a result, it anticipates fourth-quarter fiscal 2024 revenues to be $1.85 billion (+/- $150 million), implying 11.8% sequential growth at the midpoint. In the prior-year quarter, the company reported total revenues of $1.6 billion.
Non-GAAP earnings for the fiscal fourth quarter is expected to be 70 cents per share (+/- 20 cents), suggesting 112% rise sequentially at the midpoint. In the prior-year quarter, STX reported loss per share of 18 cents.
Upward Estimate Revision
The Zacks Consensus Estimate for the bottom line has been moving northward since the earnings announcement, reflecting analysts’ optimism.
The Zacks Consensus Estimate for fiscal 2024 and 2025 EPS has increased 54.5% and 15.3%, respectively, in the past 30 days. The consensus estimate for current-quarter EPS has moved up by 65.8% to 63 cents.
A Few Headwinds
Weakness in global macroeconomic conditions, especially a relatively sluggish recovery in China, remains a major concern. This could negatively impact IT budget, especially for small and mid-scale businesses.
Leveraged balance sheet is an added concern. As of Mar 29, cash and cash equivalents were $795 million compared with $787 million as of Dec 29, 2023. Long-term debt (including the current portion) was $5.671 billion compared with $5.669 billion as of Dec 29, 2023.
Other Stocks to Consider
Some other top-ranked stocks worth consideration in the broader technology space are Badger Meter BMI, Salesforce CRM and The Descartes Systems Group Inc DSGX. While BMI sports a Zacks Rank #1 (Strong Buy), CRM and DSGX carry a Zacks Rank of 2 each, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BMI’s 2024 EPS is pegged at $3.89, up 9.9% in the past 60 days. BMI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 12.7%. The long-term earnings growth rate is 15.6%. Shares of BMI have risen 41.5% in the past year.
The Zacks Consensus Estimate for Salesforce’s fiscal 2025 EPS is pegged at $9.71. The long-term earnings growth rate is 17.4%. Salesforce’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 5.1%. Shares of CRM have risen 35.3% in the past year.
The Zacks Consensus Estimate for Descartes’ fiscal 2025 EPS has increased 1.2% in the past 60 days to $1.69. Descartes earnings beat the Zacks Consensus Estimate in two of the last four quarters, while missing in the remaining two quarters, the average surprise being 5.1%. Shares of DSGX have risen 23.3% in the past year.
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Salesforce Inc. (CRM) : Free Stock Analysis Report
Badger Meter, Inc. (BMI) : Free Stock Analysis Report
Seagate Technology Holdings PLC (STX) : Free Stock Analysis Report
The Descartes Systems Group Inc. (DSGX) : Free Stock Analysis Report
