Seagate’s Strong Q3 Cloud Demand Partially Offset by External Factors; Maintain $80 FVE

No-moat Seagate Technology reported fiscal third-quarter results at the low end of company guidance, in line with its pre-announcement in March. We’re maintaining our fair value estimate of $80 per share as the company continues to have strong demand but simultaneously faces inflationary pressures and supply chain constraints. Seagate once again saw strong demand for its nearline drives. While product demand remains high, supply issues stemming from heightened freight, logistics, and input costs are hampering Seagate’s ability to ship. Nevertheless, we are encouraged by Seagate’s ability to navigate these issues and limit the impact on its margins via pricing, and we have confidence the firm can execute on its growing backlog. Shares are up around 4% following the release behind encouraging demand. We view shares as fairly valued.