Seagate drops as CEO comments raise capacity concerns

Seagate Technology (STX) shares are under pressure on Monday after comments from management at a JPMorgan conference raised concerns about the company’s ability to keep pace with surging demand for memory chips.

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TOO LONG: Seagate Technology CEO Dave Moseley said building new factories would “take too long” and could leave Seagate with excess capacity, prompting worries about whether the company can scale fast enough.

At the JPMorgan Annual Global Technology, Media, and Communications Conference, Seagate CEO Dave Moseley said, “We’re targeting mid-20s% growth, which is enormous CAGR, the only way we’re gonna get there is to be able to go through those technology transitions… That’s really the way we’re driving it. If we took the teams off and started building new factories or bringing up new machines, it would just take too long.” 

The surge in AI driven data center spending has been a major tailwind for Seagate, pushing the stock up nearly 600% over the past year and adding more than $140B in market value. Strong demand helped the company deliver record gross margins last quarter.

OF NOTE: Evercore ISI raised the firm’s price target on Seagate last week to $1,000 from $750, while keeping an Outperform rating on the shares. Underpinned by efficient supply management, technological advancements, and a “robust” demand backdrop, Seagate’s long-term growth outlook “appears strong,” the firm told investors.

Other memory and storage names are trading lower as well, including SanDisk (SNDK).

PRICE TARGET: Shares of Seagate are down about 7% at $743.55 in morning trading, while shares of SanDisk have slid about 6%.