Seagate Tech (STX) AI Stock Analysis

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Seagate Tech

(NASDAQ:STX)

65Neutral

Seagate Technology presents a mixed investment profile with strong cash flow and profitability metrics offset by financial leverage concerns. Positive earnings call insights and strategic corporate actions enhance its outlook, but technical indicators suggest caution due to potential downward momentum.

Positive Factors

Earnings

Seagate Technology's nearline cloud revenue has doubled year-over-year, driven by strong enterprise and OEM demand for higher storage needs, particularly in AI applications.

Market Position

HDDs are expected to remain the primary storage medium in data centers due to significant cost advantages over SSDs.

Technology and Innovation

The company's HAMR technology is beginning to sample with multiple customers, offering drives up to 36TB as AI demand increases storage needs.

Negative Factors

Market Competition

META is cited for considering QLC SSDs as a replacement for nearline HDDs, raising concerns about HDD demand.

Procurement Plans

Reports of META downsizing HDD procurement plans towards the end of CY25 may pose challenges for Seagate Technology.

Production Issues

Seagate Technology is facing a $200 million headwind in the current quarter due to production issues, not because of a decrease in demand.

Seagate Tech (STX) vs. S&P 500 (SPY)

Market Cap

$14.85B

Dividend Yield4.05%

Average Volume (3M)4.32M

Price to Earnings (P/E)12.8

Beta (1Y)1.81

Revenue Growth24.17%

EPS GrowthN/A

CountryUS

Employees30,000

SectorTechnology

Sector Strength51

IndustryComputer Hardware

Share Statistics

EPS (TTM)5.46

Shares Outstanding211,707,400

10 Day Avg. Volume6,292,515

30 Day Avg. Volume4,315,787

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)2.33

Price to Cash Flow (P/CF)21.10

P/FCF Ratio15.50

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$117.27

Price Target Upside67.17% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering16

Seagate Tech Business Overview & Revenue Model

Company DescriptionSeagate Technology Holdings plc provides data storage technology and solutions in Singapore, the United States, the Netherlands, and internationally. It provides mass capacity storage products, including enterprise nearline hard disk drives (HDDs), enterprise nearline solid state drives (SSDs), enterprise nearline systems, video and image HDDs, and network-attached storage drives. The company also offers legacy applications comprising Mission Critical HDDs and SSDs; external storage solutions under the Seagate Ultra Touch, One Touch, and Expansion product lines, as well as under the LaCie brand name; desktop drives; notebook drives, DVR HDDs, and gaming SSDs. In addition, it provides Lyve edge-to-cloud mass capacity platform. The company sells its products primarily to OEMs, distributors, and retailers. Seagate Technology Holdings plc was founded in 1978 and is based in Dublin, Ireland.

How the Company Makes MoneySeagate Technology generates revenue primarily through the sale of its data storage products. The company's key revenue streams include the production and distribution of hard disk drives (HDDs) and solid-state drives (SSDs) for both the consumer and enterprise markets. Seagate's extensive product lineup supports diverse applications, such as personal computing, data centers, cloud computing, and enterprise storage solutions. The company benefits from strategic partnerships with major technology companies and original equipment manufacturers (OEMs), which help drive demand for its storage solutions. Additionally, Seagate leverages its global sales network to reach a wide range of customers, thus maintaining a robust revenue model centered around the increasing need for data storage and management in the digital age.

Seagate Tech Financial Statement Overview

Summary

Seagate Tech shows strong cash flow generation and improving profitability, with a gross profit margin of 31.8% and a net profit margin of 14.7%. However, the balance sheet reveals significant financial leverage concerns due to negative stockholders' equity, indicating potential risk.

Income Statement

Positive

Seagate Tech's income statement shows improving profitability metrics in the TTM with a gross profit margin of 31.8% and a net profit margin of 14.7%, indicating strong operational efficiency. However, the revenue growth is volatile, having decreased significantly in the past year but showing recovery in the TTM. EBIT and EBITDA margins have improved from negative figures in 2023 to positive, reflecting a turnaround in operational performance.

Balance Sheet

Neutral

The balance sheet reveals financial leverage concerns with a negative stockholders' equity, leading to an undefined debt-to-equity ratio for the TTM. This indicates potential financial risk despite improved asset management. The equity ratio is negative due to liabilities exceeding assets, highlighting a need for financial restructuring to ensure long-term stability.

Cash Flow

Positive

Cash flow analysis for Seagate Tech shows strong operating cash flow relative to net income, and free cash flow has grown by 24.1% in the TTM, demonstrating effective cash management. The company generates sufficient cash flows to cover capital expenditures, indicating a healthy ability to reinvest in the business.

TTM	Jun 2024	Jun 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
8.04B	6.55B	7.38B	11.66B	10.68B	10.51B
	Gross Profit
2.55B	1.55B	1.35B	3.47B	2.92B	2.84B
	EBIT
1.36B	452.00M	-342.00M	1.96B	1.49B	1.30B
	EBITDA
1.82B	1.03B	301.00M	2.41B	1.90B	1.76B
	Net Income Common Stockholders
1.18B	335.00M	-529.00M	1.65B	1.31B	1.00B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.07B	1.36B	786.00M	615.00M	1.21B	1.72B
	Total Assets
7.99B	7.74B	7.56B	8.94B	8.68B	8.93B
	Total Debt
2.17B	6.07B	5.45B	5.65B	5.14B	4.17B
	Net Debt
391.00M	4.71B	4.67B	5.03B	3.93B	2.45B
	Total Liabilities
5.07B	9.23B	8.76B	8.84B	8.04B	7.14B
	Stockholders Equity
2.92B	-1.49B	-1.20B	109.00M	631.00M	1.79B
Cash Flow		Free Cash Flow
824.00M	664.00M	626.00M	1.28B	1.13B	1.13B
	Operating Cash Flow
938.00M	918.00M	942.00M	1.66B	1.63B	1.71B
	Investing Cash Flow
93.00M	126.00M	217.00M	-352.00M	-466.00M	-635.00M
	Financing Cash Flow
-580.00M	-473.00M	-988.00M	-1.90B	-1.67B	-1.60B

Seagate Tech Technical Analysis

Technical Analysis Sentiment

Negative

Last Price70.15

Price Trends

50DMA

89.53

Negative

100DMA

92.11

Negative

200DMA

96.74

Negative

Market Momentum

MACD

-2.37

Positive

RSI

33.18

Neutral

STOCH

20.47

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For STX, the sentiment is Negative. The current price of 70.15 is below the 20-day moving average (MA) of 81.14, below the 50-day MA of 89.53, and below the 200-day MA of 96.74, indicating a bearish trend. The MACD of -2.37 indicates Positive momentum. The RSI at 33.18 is Neutral, neither overbought nor oversold. The STOCH value of 20.47 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for STX.

Seagate Tech Risk Analysis

Seagate Tech disclosed 35 risk factors in its most recent earnings report. Seagate Tech reported the most risks in the “Ability to Sell” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Seagate Tech Peers Comparison

Overall Rating

UnderperformOutperform

Sector (57)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NTAP	68 Neutral	$16.98B	15.23	114.33%	2.50%	5.46%	23.49%
IBM	67 Neutral	$212.85B	35.72	24.14%	2.84%	1.45%	-20.56%
HPE	67 Neutral	$18.05B	6.80	12.09%	3.78%	10.93%	43.19%
STX	65 Neutral	$14.85B	12.84	-109.27%	4.05%	24.17%	―
WDC	64 Neutral	$12.13B	8.21	13.99%	―	38.59%	―
DELL	63 Neutral	$55.09B	12.38	-179.12%	2.17%	7.84%	42.63%
Sector *	57 Neutral	$19.95B	9.66	-12.05%	2.76%	5.40%	-24.89%

* Technology Sector Average

Performance Comparison

STX

Seagate Tech

70.15

-11.34

-13.92%

IBM

International Business Machines

235.48

60.13

34.29%

NTAP

NetApp

82.64

-17.79

-17.71%

WDC

Western Digital

34.40

-18.82

-35.36%

HPE

Hewlett Packard Enterprise

14.14

-2.65

-15.78%

DELL

Dell Technologies

81.93

-34.14

-29.41%

Seagate Tech Earnings Call Summary

Earnings Call Date: Jan 21, 2025 | % Change Since: -30.15% | Next Earnings Date: Apr 23, 2025

Earnings Call Sentiment Positive

The earnings call highlighted strong revenue and profitability growth, driven by increased demand in the cloud and successful product advancements such as HAMR. However, supply constraints and seasonal market declines present challenges in the near term.

Highlights

Strong Revenue Growth

Seagate achieved a 7% sequential revenue growth in the December quarter, closing calendar 2024 on a strong note.

Non-GAAP Earnings Per Share Achievement

Non-GAAP earnings per share exceeded $2 for the first time in 12 quarters.

Nearline Product Revenue Surge

Nearline product revenue almost doubled year-over-year in the December quarter and showed nearly 60% growth for the entire calendar year.

HAMR Product Milestones

Seagate completed qualification and started ramping HAMR-based products, announcing sampling drives with capacities of up to 36 terabytes.

Operating Income and Margin Growth

Non-GAAP operating income increased by 22% sequentially, with an operating margin of 23.1%.

Gross Margin Improvement

Non-GAAP gross margin expanded by 220 basis points to 35.5%, marking the seventh consecutive quarter of sequential gross margin improvement.

Lowlights

Supply Constraints Impacting Revenue

Production issues led to supply constraints for the March quarter, resulting in an estimated $200 million revenue impact.

Debt and Leverage

Seagate's debt balance was $5.7 billion at the end of the December quarter, with a net leverage ratio of 2.5x.

Seasonal Decline in VIA and Legacy Markets

Ongoing demand strength expected to partially offset seasonal declines in the VIA and legacy markets.

Company Guidance

During the Seagate Technology Q2 2025 earnings call, the company provided robust guidance marked by a 7% sequential revenue growth in the December quarter, reaching $2.33 billion. The non-GAAP gross margin expanded by 220 basis points to 35.5%, while non-GAAP earnings per share exceeded $2 for the first time in 12 quarters. The growth was driven by a significant uptake in the cloud sector, with nearline product revenue almost doubling year-over-year and showing a near 60% increase for the entire calendar year. The company also reported a 50% year-over-year revenue growth and a fourfold increase in non-GAAP operating income, with mass capacity revenue and exabyte shipments increasing 9% sequentially. Looking ahead, Seagate expects fiscal Q3 revenue to be around $2.1 billion, plus or minus $150 million, with a non-GAAP EPS projected at $1.70, plus or minus $0.20, despite a temporary $200 million revenue impact due to supply constraints. The company remains optimistic about the future, citing strong demand from cloud customers and ongoing advancements in their HAMR-based Mosaic platform, which is expected to drive significant profitable revenue growth in fiscal 2025 and beyond.

Seagate Tech Corporate Events

Private Placements and FinancingBusiness Operations and Strategy

Seagate Tech Strengthens Financial Position with New Credit Deal

Positive

Feb 3, 2025

On January 30, 2025, Seagate Technology Holdings plc entered into a new $1.3 billion credit agreement, replacing its previous 2019 credit agreement. This strategic financial move, involving several major banks, offers Seagate an unsecured revolving credit facility until 2030, enhancing its financial flexibility. The agreement includes provisions for letters of credit and swingline loans, with interest rates tied to corporate credit ratings. The comprehensive covenant structure and guarantee agreement by Seagate and its subsidiaries ensure robust financial oversight and obligations management, potentially reinforcing Seagate’s market position and stakeholder confidence.

DividendsBusiness Operations and StrategyFinancial Disclosures

Seagate Reports Strong Q2 2025 Financial Results

Positive

Jan 21, 2025

On January 21, 2025, Seagate announced its fiscal second quarter results for 2025, reporting a revenue increase to $2.33 billion and a GAAP diluted EPS of $1.55. The company achieved a decade-high gross margin and declared a quarterly cash dividend of $0.72 per share, payable on April 2, 2025. Seagate is optimistic about delivering profitable growth in fiscal 2025 with the advancement of its technology and product offerings, particularly in HAMR-based Mozaic products.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.