On Wednesday, Loop Capital announced an increase in the stock price target for Seagate Technology (NASDAQ:STX) to $135.00, up from the previous target of $105.00. The firm has maintained a Buy rating on the stock. The revision reflects the firm's belief that Seagate's financial performance is advancing ahead of schedule, and the potential for stronger-than-anticipated earnings.
The analyst at Loop Capital highlighted that the adjustment in the price target is based on a comprehensive analysis which suggests that Seagate could achieve a gross margin (GM) between 35% to 40%, with earnings per share (EPS) potentially reaching $10.00 to $15.00.
The firm posits that Seagate's stock could value between $120 to $200 in the long term, indicating significant growth potential for the hard disk drive (HDD) manufacturer.
The revised price target of $135 is derived from applying a multiple of 12 times to the firm's forecasted fiscal year 2026 (ending in June) EPS of $11.30. This projection is part of a broader structural outlook developed by Loop Capital, which includes insights from their Supply Chain Analyst, John Donovan.
Loop Capital's updated thesis on Seagate emerges from a series of discussions and analyses, including the company's earnings call, a group sell-side callback, and an individual modeling call. These interactions have provided further evidence supporting the firm's bullish stance on Seagate's market positioning and financial trajectory.
The analyst's comments underscore the firm's confidence in Seagate's strategic direction and its ability to capitalize on market opportunities, as detailed in their research note titled "12 Yrs Later… Are STX & WDC HDDs $30B Equities Hiding In Plain Sight? & CQ2 24 HDD Nearline Units Top 13.7M, Exabytes Pass 200EB; Stop – Not HAMR Time." This title refers to the firm's in-depth research into the HDD industry and Seagate's role within it.
In other recent news, Seagate Technology is receiving positive attention from various financial firms. Morgan Stanley (NYSE:MS) has raised its price target for Seagate to $133, expecting strong hard disk drive (HDD) supply and demand dynamics to drive pricing growth and margin expansion. This suggests a significant potential upside for Seagate's shares compared to the Street's earnings per share (EPS) estimates for fiscal years 2025 and 2026.
Rosenblatt Securities has also increased its target for Seagate shares to $125, following a reported surge in demand from Cloud Service Providers and the Video & Imaging Application sector. The firm attributes the company's expanding Non-GAAP gross margins to strategic manufacturing adjustments, highlighting a strong potential for earnings leverage.
Benchmark maintains its Hold rating on Seagate, citing better-than-expected results and an optimistic forecast for the first quarter of fiscal year 2025. This outlook is bolstered by a notable increase in Nearline cloud sales, contributing to higher margins.
Mizuho Securities has increased its price target on Seagate to $125, expressing confidence in the company's reported earnings and future outlook. The firm highlights a doubling in Seagate's nearline cloud revenue year-over-year and strong expectations for enterprise and OEM demand.
Lastly, TD Cowen has raised the price target of Seagate shares to $135, citing the beneficial impact of early stages of Generation Artificial Intelligence on HDDs and the continued pricing power of HDD OEMs.
InvestingPro Insights
According to real-time data from InvestingPro, Seagate Technology (NASDAQ:STX) exhibits a blend of promising financial trends and valuation metrics. The company's market capitalization stands at a robust $22.11 billion, reflecting a significant presence in the industry.
Investors may find the gross profit margin of 23.45% for the last twelve months as of Q4 2023 particularly noteworthy, as it aligns with Loop Capital's projections of Seagate achieving a gross margin between 35% to 40% in the coming years. Moreover, the company's recent revenue growth of 17.79% in Q4 2023 on a quarterly basis signals a positive trend that supports the firm's optimistic outlook.
As for InvestingPro Tips, Seagate is recognized for being a prominent player in the Technology Hardware, Storage & Peripherals industry and has maintained dividend payments for 14 consecutive years, with a current dividend yield of 2.66%. These factors contribute to the company's appeal to investors seeking both growth and income. Seagate's stock is also trading near its 52-week high, with the price at 96.05% of this benchmark, indicating strong market confidence.
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