Seagate’s Fiscal Q2 Looks Like Trough of Downturn, but We Don’t See Snapback Until Fiscal 2024

We maintain our $62 fair value estimate for Seagate Technology after its fiscal second-quarter results met our expectations. Seagate continues to face a steep downcycle in fiscal 2023 comprising numerous headwinds, but management guidance implies the December quarter was the trough. We view guidance for sequential growth positively, as does the market, with shares up 7% after hours. Still, we expect the rest of 2023 to be harsh—modest sequential growth expectations imply steep year-over-year declines. We forecast a more meaningful rebound for Seagate’s mass capacity customers in fiscal 2024, and expect the legacy business to reduce to negligible levels over the next few years. We see shares as fairly valued, and would advise investors wait for a more attractive entry point.