Seagate Earnings: We Raise Our Valuation With Higher Short-Term Growth Expectations

We raise our fair value estimate for no-moat Seagate to $67 per share from $55 as we lift our rebound expectations for the firm over the next two years. Seagate’s March-quarter results showed a continued recovery for the firm’s hard disk drive sales. Both its March-quarter results and June-quarter guidance met our model. We are now more optimistic about a steeper growth trajectory for Seagate over the next two years as it recovers from a sharp market downturn in calendar 2023. Specifically, we expect Seagate to benefit from more stable prices over the next year as demand for mass-capacity HDD returns. Even at our higher valuation, we continue to view shares as overvalued as we consider the longer-term cyclicality of Seagate’s HDD sales. We believe shares trade on the positive short-term outlook without considering future downturns.