Morningstar

10 Stocks with the Largest Fair Value Estimate Increases During Q2 Earnings

Seagate and Western Digital saw the largest valuation increases.

Signage with logo at headquarters of Arista.
Smith Collection/Gado via Getty
Securities in This Article
Western Digital Corp
(WDC)
Societe Generale SA ADR
(SCGLY)
United Rentals Inc
(URI)
Advanced Micro Devices Inc
(AMD)
SolarEdge Technologies Inc
(SEDG)

Amid a strong quarter of earnings results, Morningstar analysts have been bumping up their fair value estimates for a wide range of stocks. The list of names with the largest fair value increases is dominated by technology companies, led by hard disk drive suppliers Seagate Technology STX and Western Digital WDC.

Across the 843 US-listed stocks covered by Morningstar, there was a 1.96% average increase in fair value estimates for the second-quarter earnings season, up significantly from last quarter’s 0.42% average decrease.

Among the stocks we scanned for changes, 8% saw increases of 10% or more—double last quarter’s number. Over the past 10 years, 7% of the group had average quarterly fair value estimate increases of 10% or more.

The technology and communication services sectors saw the highest rate of increase. Roughly 16.2% of tech stocks saw a fair value increase of at least 10.0%, and the average increase was 4.4%. That’s the second-largest quarterly change for any sector in the past three years, behind the 5.1% average increase for technology in the fourth quarter of 2024. Among communication services companies, 14.5% had fair value increases of at least 10.0%, and the average increase was 1.3%.

Here are the stocks with the largest percentage increases in their fair value estimates:

  • Seagate Technology STX: $149 from $85
  • Western Digital WDC: $82 from $48
  • Societe Generale SCGLY: $10.50 from $6.57
  • United Rentals URI: $938 from $590
  • Arista Networks ANET: $120 from $82
  • Sunrun RUN: $9.00 from $6.50
  • Sonic Automotive SAH: $92 from $67
  • SolarEdge Technologies SEDG: $20 from $15
  • CyberArk Software CYBR: $465 from $353
  • Advanced Micro Devices AMD: $155 from $120

Here’s what Morningstar analysts had to say about each stock.

Seagate Technology

Seagate saw two fair value bumps during the quarter. The most recent, to $149 per share from $131, came after the company reported earnings. “Seagate’s fiscal fourth-quarter results included year-over-year revenue growth of 30% and gross margin expanding over 200 basis points quarter over quarter as higher-density HAMR—heat-assisted magnetic recording—shipments ramp up,” wrote director of equity research Eric Compton. “Seagate has said that demand from data center clients for nearline storage, boosted by artificial intelligence, is ushering in a new era for the hard disk drive industry, and we believe its latest quarterly results support that claim.”

Earlier in the quarter, Seagate’s fair value was raised to $131 from $85 to “reflect the impact of favorable structural shifts from the AI boom as well as improved pricing and operating profitability from the upcoming HAMR ramps,” according to Compton. “Seagate Technology plans to ramp its Mozaic 4+ early next year, with qualifications for Mozaic 5+ expected to begin by early 2028. The firm expects a mix shift to heat-assisted magnetic recording drives to accelerate revenue growth and margin expansion.”

Read Compton’s full take on Seagate Technology here.

Western Digital Technologies

“Western Digital delivered robust fiscal fourth-quarter results, reporting year-over-year revenue growth of 30% to $2.6 billion, exceeding the high end of guidance. Non-GAAP gross margin improved to 41.3%, the best result in many years. Similar to peer Seagate, Western Digital is showing signs that the hard disk drive industry is entering a new era, with both companies benefiting from consistent data center demand and ramping higher-capacity HDD volume.

“Given current results, the strong guidance for next quarter, and our evolving thesis on the HDD industry, we are raising our fair value estimate for Western Digital to $82 per share from $48. We now view the shares as fairly valued.”

—Eric Compton

Compton has more about Western Digital Technologies here.

Societe Generale

“Societe Generale delivered strong results, showing impressive cost management that contributed to a 30% quarter-over-quarter and 70% half-over-half increase in net income. The bank announced a share buyback program and an interim dividend. Shares rose 7% on the market open on July 31.

“SocGen posted revenue growth of 8.6% when excluding disposal effects and reduced its cost/income ratio to 64% for the first half, improving its full-year guidance to below 65% (from below 66% previously).

“Our fair value estimate for no-moat SocGen is now EUR 46 per share. At current levels, the shares appear fairly valued. The stock has doubled year to date, supported by the ongoing turnaround focused on cost management and streamlining operations.”

—Johann Scholtz, senior equity analyst

Investors can find more of Scholtz’s take on Societe Generale here.

United Rentals

“After taking a fresh look at United Rentals, we upgraded our moat rating to narrow from none and raised our fair value estimate to $938 per share from $590 to reflect our more constructive view on its competitive position. We maintain our Standard Capital Allocation Rating.

“We believe the company has a robust and enduring cost advantage versus peers, derived from economies of scale and scope. It is well managed, with margins and returns superior to peers.

“United Rentals has reached a critical mass with customers and suppliers such that its one-stop shop model consistently bears fruit. The company and its industry have benefited from economic tailwinds, but United Rentals is perhaps best viewed as an outsourcing solution for its customers.”

—George Maglares, equity analyst

Take a deeper dive into Maglares’ outlook for United Rentals.

Arista Networks

“Arista’s second-quarter results crushed management guidance, and the firm significantly raised its full-year 2025 outlook. Revenue rose 30% year over year to $2.2 billion. 2025 guidance now calls for 25% revenue growth, to $8.75 billion, up from 17% growth.

“Arista’s best-of-breed capabilities in Ethernet switching are firing on all cylinders as it continues to take market share. 2025 guidance beat our already-bullish estimates. Artificial intelligence and cloud spending are driving immense growth in 2025, which we expect to continue into the long term.

“We raise our fair value estimate for wide-moat Arista Networks to $120 per share, from $82, after materially raising our long-term growth forecast. Shares rose 14% after-hours due to the big guidance raise and look slightly overvalued.”

—William Kerwin, senior equity analyst

Kerwin has more about Arista Networks stock here.

Sunrun

“On July 3, the US House narrowly passed the budget reconciliation bill, which is expected to be signed by President Trump. The final bill includes changes to current renewable energy incentives, but it’s more favorable than earlier drafts, sending shares of solar stocks higher by 5%-15%.

“We view utility-scale wind and solar as relative winners in the final legislation. While the bill technically accelerates the phaseout of credits to year-end 2027, we see potential for projects being placed in service up until 2030 to qualify for incentives, assuming they meet commence construction requirements within the next year.”

—Brett Castelli, equity analyst

Take a deeper dive into Castelli’s outlook for Sunrun.

Sonic Automotive

“Sonic’s EchoPark stand-alone used vehicle store business has improved operations since closing many stores in mid-2023 and early 2024 to focus on markets where it could get more scale and hold better brand awareness. The segment has posted positive adjusted EBITDA for five straight quarters.

“EchoPark’s losses and the time needed to scale have been a drag on earnings; however, we believe the company has turned the corner on this business. Nevertheless, used vehicles remain more expensive for consumers than they were pre-pandemic.

“We don’t see a reason to change Sonic’s narrow moat rating, but we are increasing our fair value estimate to $92 per share from $67 per share. The change is from lowering our weighted average cost of capital to 8% from 9%.”

—David Whiston, senior equity analyst

The rest of Whiston’s take on Sonic Automotive can be found here.

SolarEdge Technologies

“SolarEdge reported second-quarter revenue of $281 million from continuing operations and non-GAAP gross margin of 13.1%, both at the high end of its guidance range. Guidance for the third quarter calls for revenue of $335 million and non-GAAP gross margin of 17%.

“The main headline from the quarter was that excess inventories at its European distributors, which have plagued results in recent years, have largely returned to normal.”

—Brett Castelli

Read Castelli’s full take on SolarEdge Technologies here.

CyberArk Software

“CyberArk reported solid second-quarter earnings ahead of schedule, alongside the announcement that Palo Alto intends to acquire the firm for around $25 billion. The firm also canceled its earnings conference call as a result of the announced Palo Alto transaction.”

“CyberArk’s earnings showed great strength and continued momentum, with the firm’s impressive 46% topline growth highlighting why Palo Alto is interested in acquiring this high-growth firm as it seeks to build out an identity security platform.”

“We are raising our fair value estimate for CyberArk to $465 from $353, which equates to the present fair value of 2.2005 Palo Alto shares and $45 in cash that shareholders will receive a year from now when the deal closes. Our stand-alone fair value for CyberArk remains $353 per share.”

—Malik Ahmed Khan, equity analyst

Khan has more about CyberArk Software stock here.

Advanced Micro Devices

AMD saw two fair value bumps during the quarter. The most recent, to $155 per share from $140, came after the company reported earnings. “AMD reported second-quarter revenue of $7.7 billion, up 3% sequentially, up 32% year over year, and at the high end of guidance,” wrote senior equity analyst Brian Colello. “AMD forecasts third-quarter revenue of $8.7 billion, which would represent growth of 13% sequentially, 28% year over year, and ahead of FactSet Consensus estimates. AMD continues to prosper from Intel’s struggles as it gains market share in both PC and server processors. Meanwhile, all eyes remain on AMD’s budding artificial intelligence business, and we think the results were admirable given the ban on MI308 processor sales into China.”

Earlier in the quarter, Colello raised AMD’s fair value to $140 per share from $120 following news that the firm would be able to sell to China. “AMD has learned that the US will reverse course and approve the sale of its MI308X graphics processors, or GPUs, into China for artificial intelligence workloads,” Colello wrote. “Sales of the MI308X were banned 90 days ago, causing AMD to incur an $800 million write-off. We’re pleasantly surprised by the US reversal, as both AMD and rival Nvidia are now allowed to support China’s AI aspirations. The MI308X is not AMD’s most advanced product, but it presents another potential customer base for AMD’s budding AI aspirations versus Nvidia.”

Read Colello’s full take on Advanced Micro Devices here.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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