Seagate Technology (NASDAQ: STX) has maintained its Hold status according to a Benchmark analyst.
The firm's assessment was based on Seagate's reported results which surpassed expectations, primarily fueled by strong cloud demand. In the first quarter of fiscal year 2025, U.S. cloud service providers significantly contributed to the company's revenue growth.
Notably, Seagate experienced its first meaningful demand increase in the Nearline Enterprise/OEM market. Additionally, the company's Video and Image Applications (VIA) sales figures remained constant.
The analyst highlighted that the growing cloud sales are expected to drive higher sales volumes and profit margins. Furthermore, the integration of Artificial Intelligence (AI) opportunities and PCs equipped with AI chips is anticipated to sequentially enhance margins and non-GAAP earnings as fiscal year 2025 progresses.
For fiscal year 2026, the projection for Seagate's non-GAAP earnings stands at $8.44 per diluted share, with sales estimated at $10.1 billion.
Seagate's shares are currently trading at a forward Price-to-Earnings (P/E) ratio of 13.3 times, which, based on the financial forecast, is considered to represent fair value by the analyst. Consequently, the recommendation to keep the stock at a Hold rating has been reiterated.
The company's performance in the cloud sector and the potential for margin improvement due to AI integration are key factors in this assessment.
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