Cautious Outlook on Seagate Tech Amid HAMR Technology Uncertainties and Market Challenges

Wells Fargo analyst Aaron Rakers has maintained their neutral stance on STX stock, giving a Hold rating yesterday.

Aaron Rakers has given his Hold rating due to a combination of factors affecting Seagate Tech’s current market position and future prospects. One of the primary considerations is the company’s focus on the HAMR technology ramp-up, which is expected to drive growth but also comes with uncertainties regarding its impact on gross margins. While there is optimism about achieving a 40% gross margin, Rakers suggests a more conservative range of 38%-40% might be more realistic given the current market conditions.
Additionally, the anticipated revenue growth, largely driven by nearline HDDs, is promising but hinges on industry supply and pricing discipline. The company’s ability to maintain a high EBIT margin and manage non-HDD revenue, which typically has lower margins, also plays a role in the Hold rating. Overall, while there are positive indicators for Seagate’s future, the uncertainties and challenges in achieving the projected targets warrant a cautious approach, justifying the Hold recommendation.

In another report released yesterday, Cantor Fitzgerald also maintained a Hold rating on the stock with a $125.00 price target.

STX’s price has also changed moderately for the past six months – from $97.800 to $109.040, which is a 11.49% increase.