Data Storage Giant Seagate Sees Resurgence Ahead of Earnings Report
As the world’s largest manufacturer of hard-disk drives, Seagate Technology (STX) has been on a rollercoaster ride in recent months. Despite a slump in the final quarter of 2024, the company’s stock rose on Tuesday ahead of its fiscal second-quarter earnings report, thanks to a vote of confidence from Morgan Stanley analysts.
A Contrarian View
Morgan Stanley analyst Erik Woodring took a contrarian stance by elevating Seagate to top pick among IT hardware stocks, replacing Apple (AAPL). Woodring cited the persistence of the hard-disk drive cycle and transitory near-term supply issues, which could lead to a revenue snapback in the June quarter. He also believes Wall Street estimates for Seagate’s gross margin are too conservative.
Seagate’s Path to Recovery
Seagate’s stock had fallen nearly 20% in the final months of 2024, following lower-than-expected core profit guidance and a delay in ramping up production. However, Woodring’s positive overweight rating and $129 price target suggest that the company is poised for a comeback. He attributes this to accelerating data growth, which drives storage demand in the cloud and on-premise.
Outperforming Apple
Woodring’s thesis is that Seagate will outperform Apple over the next 3-6 months, despite Apple’s recent underperformance. He remains bullish on Apple, but believes Seagate has greater upside potential.
Earnings Expectations
Analysts expect Seagate’s adjusted earnings to surge to $1.88 per share, compared to 12 cents per share in the same quarter last year. Sales are projected to increase 49% to $2.32 billion.
A Rebound in the Making
Seagate’s stock has rallied 17% in January, recovering from a 15% decline in December. The company’s recent slump has dragged down its IBD Composite Rating to 65 out of 99, but its earnings rebound gives it an EPS Rating of 81 out of 99.
What’s Next for Seagate?
As Seagate prepares to publish its December quarter results, investors will be watching closely to see if the company can continue its resurgence. With a potential entry point of 115.32, according to MarketSurge, Seagate stock could be poised for further growth.
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