Citi has maintained a positive outlook on Seagate Technology (NASDAQ: STX), increasing its price target to $130 from $125 and reaffirming a Buy rating.
The adjustment follows Seagate's reported earnings, which surpassed expectations due to rising demand for high-capacity drives and beneficial pricing trends.
According to Citi's analysis, Seagate is experiencing sustained demand strength, particularly from cloud services and enterprise original equipment manufacturers (OEMs).
This demand is expected to continue, bolstered by favorable pricing actions and limited capacity additions.
Management is also projecting structurally higher profitability going forward, as build-to-order models enhance predictability and cost improvements are realized from a shift in product mix to higher capacity drives.
Seagate's management has highlighted progress on Heat-Assisted Magnetic Recording (HAMR) technology, noting shipments to a select group of customers in the September quarter. Major cloud qualifications are anticipated to be completed in the December quarter, with a faster ramp-up of trials at other cloud customers. The company still expects broader shipments to commence around mid-2025.
In other recent news, Seagate Technology reported robust quarterly results with revenues of $2.17 billion and earnings per share (EPS) of $1.58, surpassing anticipated figures. The company experienced a significant 49% increase in year-over-year revenue, driven by a 55% rise in hard disk drive sales.
Evercore ISI raised its price target for Seagate to $135, maintaining an Outperform rating due to these impressive results. Other financial firms, including BofA Securities, Loop Capital, and Morgan Stanley, also revised their price targets, citing potential revenue and margin recovery, strong hard disk drive supply and demand dynamics, and significant growth potential.
In other developments, Seagate's shareholders approved executive pay and the re-allotment of shares during the recent Annual General Meeting. Additionally, Robert A. Bruggeworth, a member of the Board of Directors, announced he will not stand for re-election at the upcoming Annual General Meeting of Shareholders.
InvestingPro Insights
Seagate Technology's recent performance and future outlook align well with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 77.86% total return over the past year and a 31.92% return in the last six months. This aligns with Citi's bullish stance and increased price target.
InvestingPro Tips highlight that Seagate is trading at a low P/E ratio relative to near-term earnings growth, which supports Citi's positive outlook on the company's profitability. Additionally, analysts anticipate sales growth in the current year, corroborating management's projections of sustained demand strength from cloud services and enterprise OEMs.
The company's financial health is further underscored by its dividend history, with InvestingPro noting that Seagate has maintained dividend payments for 14 consecutive years. This consistency in shareholder returns, coupled with a current dividend yield of 2.49%, adds to the stock's appeal for income-focused investors.
For those seeking a deeper understanding of Seagate's potential, InvestingPro offers 13 additional tips that could provide valuable insights into the company's financial position and market outlook.
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