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Seagate Technology Holdings PLC STX

Morningstar Rating
$97.16 +4.11 (4.42%)
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Company Report

Seagate Earnings: The HDD Recovery Is Underway, but Shares Have Well Exceeded Fundamentals

We maintain our $55 fair value estimate for shares of no-moat Seagate Technology after fiscal second-quarter results aligned with our medium-term recovery thesis. Seagate met our sales expectations for the December quarter and outperformed on profitability. After the hard disk drive, or HDD, market nearly halved across calendar 2022 and 2023, we continue to anticipate a multiyear demand recovery. Seagate’s largest driver is demand in cloud data centers, which rose sequentially for the second quarter in a row off a bottom for sales in June. To us, back-to-back sequential growth exhibits the start of a market recovery. Nevertheless, we see shares as materially overvalued. In our view, Seagate’s stock is already pricing in a full multiyear recovery in HDD demand, but we think the share price has overshot the firm’s fundamental opportunity in the next five years.

Price vs Fair Value

STX is trading at a 77% premium.
Price
$97.16
Fair Value
$94.00
Uncertainty
High
1-Star Price
$32.53
5-Star Price
$89.00
Economic Moat
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Capital Allocation
Vyjmvgzx

Bulls Say, Bears Say

Bulls

We think strong demand for Seagate’s nearline drives will power mid-single-digit top-line growth in the short term as enterprises look to store the growing amount of data they generate.

Bears

We think the HDD market is commoditylike and cyclical, leaving Seagate vulnerable to market pricing declines that can shrink the top line and sink margins.

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News

Trading Information

Previous Close Price
$93.05
Day Range
$94.1298.15
52-Week Range
$54.3298.15
Bid/Ask
$96.50 / $97.20
Market Cap
$20.36 Bil
Volume/Avg
5.1 Mil / 2.2 Mil

Key Statistics

Price/Earnings (Normalized)
540.21
Price/Sales
3.12
Dividend Yield (Trailing)
2.88%
Dividend Yield (Forward)
2.88%
Total Yield
2.88%

Company Profile

Seagate is a leading supplier of hard disk drives for data storage to the enterprise and consumer markets. It forms a practical duopoly in the market with its chief rival, Western Digital; they are both vertically integrated.
Sector
Technology
Industry
Computer Hardware
Stock Style Box
Large Value
Total Number of Employees
33,400

Competitors

Valuation

Metric
STX
000660
MU
Price/Earnings (Normalized)
540.21433.29
Price/Book Value
1.952.45
Price/Sales
3.123.696.44
Price/Cash Flow
116.1529.43
Price/Earnings
STX
000660
MU

Financial Strength

Metric
STX
000660
MU
Quick Ratio
0.550.722.01
Current Ratio
1.041.503.53
Interest Coverage
−0.95−10.36−14.24
Quick Ratio
STX
000660
MU

Profitability

Metric
STX
000660
MU
Return on Assets (Normalized)
−1.54%−9.29%−8.95%
Return on Equity (Normalized)
−15.90%−12.82%
Return on Invested Capital (Normalized)
3.57%−9.79%−10.02%
Return on Assets
STX
000660
MU
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