Seagate's Fiscal 2023 Going From Bad to Worse in Cyclical Downturn; Lowering Our FVE to $62

We are lowering our fair value estimate for no-moat Seagate Technology to $62 per share from $70 after reducing our 2023 expectations. Poor demand for hard disk drives moved into Seagate’s cloud customers in the September quarter, which we view as worrisome for the firm. We now model declines across all verticals for Seagate in fiscal 2023. We continue to expect a rebound for cloud customers in fiscal 2024 but don’t expect Seagate to fully recover its lost demand. Long term, cloud demand should remain Seagate’s primary growth driver. Cyclical downturns like this one damp the effect of secular drivers toward data expansion and cloud buildouts, hamper profitability, and underpin our no-moat rating. We recommend seeking a greater margin of safety before considering an investment in Seagate.