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Seagate (STX) Stock Jumps 19% YTD: Is it Too Late to Invest?
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Seagate Technology Holdings plc (STX - Free Report) is continuing its upward trajectory, with an appreciation of 19.2% year to date compared with the S&P 500 composite and sub-industry’s growth of 16.5% and 17.6%, respectively.
Image Source: Zacks Investment Research
Solid financial performance is buoying the stock’s trajectory. STX’s earnings beat estimates in three of the last four quarters, delivering an average surprise of 80.9%.
Image Source: Zacks Investment Research
Technical indicators are also supportive of STX’s strong performance. The stock is trading above its 100-day and 200-day moving averages, indicating upward momentum and price stability. This technical strength reflects positive market perception and confidence in its growth prospects.
Image Source: Zacks Investment Research
STX is currently trading at a nearly 10% discount to its 52-week high of $113.57, reached on Jul 24, 2024. This pullback from the peak might offer a strategic buying opportunity for investors looking to capitalize on potential future gains.
Demand for Mass Capacity Solutions Driving Growth
Seagate’s performance is being driven by momentum in mass capacity solutions. This can be attributed to stronger nearline cloud demand. A strong global cloud demand environment drove mass capacity revenues, which surged 46% year over year to $1.437 billion in the last reported quarter. Sequentially, mass capacity revenues were up 22%.
Nearline cloud revenues more than doubled year over year, owing to higher traditional cloud computing workloads and new AI deployments. STX expects this momentum to continue in the fiscal 2025.
Mass capacity exabyte shipments represent more than 90% of total exabyte shipments. The company shipped 103.9 exabytes for the mass-capacity storage market (including nearline, video and image applications and network-attached storage). This recorded a year-over-year increase of 38% in exabyte shipments and 17% sequentially.
The improving metrics signify that things are probably looking brighter for STX after a period of lackluster performance. Seagate’s launch of the Mozaic 3+ hard drive platform, featuring Heat-Assisted Magnetic Recording technology, is also expected to help capture a greater share of the mass capacity storage solutions market.
STX stated that it shipped a small volume of Mozaic 3+ for revenues to non-cloud customers in the fiscal fourth quarter. It anticipates completing the qualification with the lead CSP customer and starting multiple qualifications with U.S. and China cloud customers in the current quarter. It anticipates a larger volume ramp from mid-calendar 2025.
Upbeat Guidance
Driven by incremental improvements in mass capacity demand, management anticipates first-quarter fiscal 2025 revenues to be $2.10 billion (+/- $150 million).
Gross margin is expected to benefit from a higher mix of mass capacity revenues and ongoing pricing actions. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the high-teens percentage range of revenues.
Non-GAAP earnings for first-quarter fiscal 2025 are expected to be $1.40 per share (+/- 20 cents).
STX expects the fiscal 2025 capex to be at or below the low end of its long-term target range of 4-6% of revenues.
Estimate Revision Favoring the Stock
Reflecting the positive sentiment around STX, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have increased their estimates for the current and next quarter by 49% and 36.4% to $1.43 and $1.80 per share, respectively.
Image Source: Zacks Investment Research
A Value-Driven Choice
Seagate presents a compelling investment opportunity with its attractive forward 12-month price-to-sales ratio of 2.22X, significantly lower than the industry average of 6.79X observed over the past three years.
Seagate has delivered a solid year-to-date gain of 19.2%, demonstrating strong performance in a competitive market. While peers like NetApp (NTAP - Free Report) , Pure Storage (PSTG - Free Report) , and Western Digital (WDC - Free Report) have posted higher gains of 48%, 75%, and 22.3%, respectively, Seagate’s consistent growth reflects its stability and potential for continued success.
Its forward 12-month price-to-sales ratio, positions Seagate as a value-driven choice with significant upside potential.
Image Source: Zacks Investment Research
Wrapping Up
Increasing demand for mass capacity solutions and strategic initiatives suggest that there might still be room for further growth. Given the recent pullback from its 52-week high, investors have an opportunity to invest in this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Seagate (STX) Stock Jumps 19% YTD: Is it Too Late to Invest?
Seagate Technology Holdings plc (STX - Free Report) is continuing its upward trajectory, with an appreciation of 19.2% year to date compared with the S&P 500 composite and sub-industry’s growth of 16.5% and 17.6%, respectively.
Image Source: Zacks Investment Research
Solid financial performance is buoying the stock’s trajectory. STX’s earnings beat estimates in three of the last four quarters, delivering an average surprise of 80.9%.
Image Source: Zacks Investment Research
Technical indicators are also supportive of STX’s strong performance. The stock is trading above its 100-day and 200-day moving averages, indicating upward momentum and price stability. This technical strength reflects positive market perception and confidence in its growth prospects.
Image Source: Zacks Investment Research
STX is currently trading at a nearly 10% discount to its 52-week high of $113.57, reached on Jul 24, 2024. This pullback from the peak might offer a strategic buying opportunity for investors looking to capitalize on potential future gains.
Demand for Mass Capacity Solutions Driving Growth
Seagate’s performance is being driven by momentum in mass capacity solutions. This can be attributed to stronger nearline cloud demand. A strong global cloud demand environment drove mass capacity revenues, which surged 46% year over year to $1.437 billion in the last reported quarter. Sequentially, mass capacity revenues were up 22%.
Nearline cloud revenues more than doubled year over year, owing to higher traditional cloud computing workloads and new AI deployments. STX expects this momentum to continue in the fiscal 2025.
Mass capacity exabyte shipments represent more than 90% of total exabyte shipments. The company shipped 103.9 exabytes for the mass-capacity storage market (including nearline, video and image applications and network-attached storage). This recorded a year-over-year increase of 38% in exabyte shipments and 17% sequentially.
The improving metrics signify that things are probably looking brighter for STX after a period of lackluster performance. Seagate’s launch of the Mozaic 3+ hard drive platform, featuring Heat-Assisted Magnetic Recording technology, is also expected to help capture a greater share of the mass capacity storage solutions market.
STX stated that it shipped a small volume of Mozaic 3+ for revenues to non-cloud customers in the fiscal fourth quarter. It anticipates completing the qualification with the lead CSP customer and starting multiple qualifications with U.S. and China cloud customers in the current quarter. It anticipates a larger volume ramp from mid-calendar 2025.
Upbeat Guidance
Driven by incremental improvements in mass capacity demand, management anticipates first-quarter fiscal 2025 revenues to be $2.10 billion (+/- $150 million).
Gross margin is expected to benefit from a higher mix of mass capacity revenues and ongoing pricing actions. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the high-teens percentage range of revenues.
Non-GAAP earnings for first-quarter fiscal 2025 are expected to be $1.40 per share (+/- 20 cents).
STX expects the fiscal 2025 capex to be at or below the low end of its long-term target range of 4-6% of revenues.
Estimate Revision Favoring the Stock
Reflecting the positive sentiment around STX, the Zacks Consensus Estimate for earnings per share has seen upward revisions. In the past 60 days, analysts have increased their estimates for the current and next quarter by 49% and 36.4% to $1.43 and $1.80 per share, respectively.
Image Source: Zacks Investment Research
A Value-Driven Choice
Seagate presents a compelling investment opportunity with its attractive forward 12-month price-to-sales ratio of 2.22X, significantly lower than the industry average of 6.79X observed over the past three years.
Seagate has delivered a solid year-to-date gain of 19.2%, demonstrating strong performance in a competitive market. While peers like NetApp (NTAP - Free Report) , Pure Storage (PSTG - Free Report) , and Western Digital (WDC - Free Report) have posted higher gains of 48%, 75%, and 22.3%, respectively, Seagate’s consistent growth reflects its stability and potential for continued success.
Its forward 12-month price-to-sales ratio, positions Seagate as a value-driven choice with significant upside potential.
Image Source: Zacks Investment Research
Wrapping Up
Increasing demand for mass capacity solutions and strategic initiatives suggest that there might still be room for further growth. Given the recent pullback from its 52-week high, investors have an opportunity to invest in this Zacks Rank #1 (Strong Buy) stock. You can see the complete list of today’s Zacks #1 Rank stocks here.