Seagate (STX) shares rallied 11.7% in the last trading session to close at $74.29. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 23.5% loss over the past four weeks.The increase in share price can attributed to President Trump’s announcement of a 90-day pause on reciprocal tariffs, barring China. This led to increases for most stocks including Seagate and subsequent skyrocketing indices.Seagate is well-pois ...

Group 1 - The article discusses significant changes in the tech sector since September, highlighting events like CES and the introduction of DeepSeek's R1 generative AI model [1] - The author emphasizes a bullish investment strategy focused on companies with strong fundamentals, particularly in revenue and earnings growth, while also considering market sentiment [1] Group 2 - The author has a background in the investment industry, influenced by family experience, which shapes their analytical approach [1] - The analysis style includes fundamental and sentiment analysis, with a preference for identifying opportunities across various industries [1]

Company Overview - Seagate Technology Holdings plc (STX) is positioned to benefit from strong momentum in mass capacity, which is a significant contributor to its revenues [1] - Mass capacity revenues increased by 79% year over year and 9% sequentially, driven by robust cloud demand [1] Nearline Revenue Growth - Nearline revenues nearly doubled in Q2 of fiscal 2025 compared to the previous year, reflecting a 60% growth for 2024 [2] - This growth is attributed to strong demand from cloud service providers and Enterprise/OEM clients, aligning with a 50% increase in cloud capital expenditures by customers in 2024 [2] Cloud and AI Integration - Cloud service providers are increasingly focusing on AI application development and cloud infrastructure deployment, with HDDs expected to play a crucial role in this transition [3] - Seagate anticipates a rise in HDD demand as these trends continue [3] Revenue Projections - Management forecasts Q3 fiscal 2025 revenues to be around $2.1 billion (+/- $150 million), with an estimate of $2,140.1 million [4] - Strong cloud demand is expected to mitigate seasonal declines in other markets, despite supply chain challenges potentially impacting revenues by $200 million [4] Product Innovations - Seagate has ramped up production of its 24-28 terabyte PMR drives, which are now the top-selling product line [6] - The company is scaling up production of HAMR-based Mozaic products and has achieved significant milestones with capacities up to 36 terabytes [7] Competitive Landscape - The data storage industry is experiencing intense competition, which could lead to pricing pressures affecting margin performance [8] - Seagate faces competition from companies like Western Digital Corporation (WDC), NetApp Inc (NTAP), and Pure Storage, Inc (PSTG) in both HDD and SSD markets [9] Competitor Insights - Western Digital has separated its HDD and Flash businesses into independent companies, focusing on innovation in storage technologies [10] - NetApp is seeing strong demand for its all-flash portfolio, with a reported annualized net revenue run rate of $3.8 billion, up 10% year over year [12] - Pure Storage reported an 11% revenue increase to $879.8 million, driven by record sales across its product offerings [13]

Seagate Technology Holdings plc (STX) is trading comparatively cheap from a valuation standpoint. STX is currently trading at a forward 12-month price-to-sales ratio of 2.05X, a discount compared with the Zacks Computer & Technology sector’s 6.53X and the Zacks Computer – Integrated Systems industry’s 3.27X.Image Source: Zacks Investment ResearchThe stock also looks attractively valued relative to other peers like International Business Machines Corporation (IBM) , Advanced Micro Devices, Inc. (AMD) and Agi ...

Chip stocks have had a major rude awakening in 2025, with news that China’s DeepSeek AI models may not need advanced Nvidia ( NVDA ) chips to build out highly functional LLMs. But while Nvidia has dominated the headlines, there’s oneWith combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contribut ...

Group 1: Company Performance - Seagate reported Q2 earnings with net sales of $2.3 billion, a 50% year-over-year increase, driven by a rebound in storage demand [1] - The company's gross margin improved from 23.3% in Q2 2024 to 34.9% in Q2 2025, while operating margin expanded from 8.0% to 21.0% [1] - Earnings per share (EPS) surged to $1.55 from $(0.09) over the same period [1] Group 2: Stock Performance - Seagate stock has risen 30% since early January 2024, outperforming the S&P 500's 28% increase during the same period [2] - The stock has experienced significant volatility over the past four years, with returns of 88% in 2021, -51% in 2022, 69% in 2023, and 4% in 2024 [5] Group 3: Future Outlook - Seagate is focusing on Heat Assisted Magnetic Recording (HAMR) technology, shipping 30 TB hard disks, which positions the company for growth amid increasing demand for high-capacity drives [3] - Revenue is expected to grow 40% year-over-year to $9.2 billion in 2025, with a valuation estimate of $115 per share, reflecting a 6% upside from current levels [4] - Analysts have an average price estimate of $123 for Seagate, indicating nearly 13% upside potential [4]

Revenue and Gross Margin - Revenue for the December 2024 quarter was $2.3 billion, with a gross margin of 34.9% and operating cash flow of $221 million[122] - Revenue increased by $157 million compared to the September 2024 quarter, driven by higher demand for nearline products and favorable pricing actions[126] - Gross margin for the December 2024 quarter increased by 2 percentage points compared to the September 2024 quarter, primarily due to favorable product mix and cost efficiencies[129] - Gross margin for the December 2024 quarter increased by 12 percentage points compared to the December 2023 quarter, driven by favorable product mix, pricing actions, and the absence of $36 million in factory underutilization charges[130] - Revenue for the six months ended December 27, 2024, increased by $1.5 billion compared to the same period in 2023, primarily due to higher demand for nearline products and favorable pricing actions[127] Product Shipments and Demand - The company shipped 151 exabytes of HDD storage capacity in the December 2024 quarter, with mass capacity drives accounting for 140 exabytes[126] - The company anticipates temporary supply constraints in the March quarter due to resolved production challenges, but expects continued growth in HDD storage demand driven by Generative AI applications[123] Sales Incentives and Warranty Costs - Sales incentive programs accounted for 14% of gross revenue in the December 2024 quarter, compared to 13% in the September 2024 quarter and 18% in the December 2023 quarter[128] - Warranty costs related to new shipments were 0.7% of revenue in the December 2024 quarter, consistent with the September 2024 quarter and down from 0.9% in the December 2023 quarter[132] Expenses - Product development expenses increased by $3 million in the December 2024 quarter compared to the September 2024 quarter, primarily due to higher compensation and employee benefits[133] - Product development expenses increased by $23 million in the December 2024 quarter compared to the December 2023 quarter, primarily due to a $24 million increase in compensation and other employee benefits[134] - Marketing and administrative expenses increased by $31 million in the December 2024 quarter compared to the December 2023 quarter, primarily due to a $26 million increase in compensation and other employee benefits[137] - Other expense, net increased by $51 million in the December 2024 quarter compared to the September 2024 quarter, primarily due to a $50 million increase in net loss from certain investments[140] Cash and Financial Obligations - Cash and cash equivalents decreased by $120 million from June 28, 2024 to December 27, 2024, primarily due to $295 million in dividends paid to shareholders and $139 million in capital expenditures[146] - The company has $1.5 billion available for borrowing under its senior unsecured revolving credit facility as of December 27, 2024[148] - The company has unconditional purchase obligations of approximately $900 million as of December 27, 2024, with $810 million expected to be paid within one year[156] - Future principal payment obligation on long-term debt is $5.7 billion as of December 27, 2024, with $479 million due within one year[158] - The company accrued a settlement penalty of $300 million related to BIS' allegations of violations of the U.S. EAR, with $60 million expected to be paid within one year[159] - The company declared a quarterly cash dividend of $0.72 per share, payable on April 2, 2025[160] - The company expects capital expenditures to be higher in fiscal year 2025 compared to fiscal year 2024[162] Investments and Financial Instruments - The company has $531 million in floating rate money market funds, time deposits, and certificates of deposit with an average interest rate of 4.53%[169] - The company holds $5,729 million in fixed rate debt obligations with an average interest rate of 5.64%, maturing in various years up to 2029 and beyond[169] - The company has foreign currency forward exchange contracts with a total notional amount of $280 million, including $167 million in Singapore Dollars, $66 million in Thai Baht, $31 million in Chinese Renminbi, and $16 million in British Pound Sterling[173] - The company uses Total Return Swaps (TRS) to manage equity market risks associated with its non-qualified deferred compensation plan liabilities, paying a floating rate based on SOFR plus an interest rate spread[175]

Analyst Background - Michael Del Monte is a buy-side equity analyst with over 5 years of industry experience and a decade in professional services across various sectors including O&G, OFS, Midstream, Industrials, Information Technology, EPC Services, and consumer discretionary [1] - The analyst employs a macro-value-oriented approach to investment analysis, leveraging cross-industry insights to make investment recommendations [1] Analyst's Position - The analyst holds a beneficial long position in the shares of STX, ORCL, DELL, and HPE through stock ownership, options, or other derivatives [2] - The article reflects the analyst's personal opinions and is not influenced by compensation or business relationships with the mentioned companies [2]

Company Performance - Seagate Technology shares surged close to 7% on Wednesday and are up more than 21% over the past year [4] - The company's fiscal second-quarter results topped estimates, leading to a jump in its stock price [1] Analyst Opinions - Morgan Stanley analysts called Seagate's stock a "top pick," citing AI-driven demand for data storage [2][4] - Morgan Stanley raised its price target to $134 from $129 and maintained an "overweight" rating [2] - Mizuho analysts boosted their price target to $115 from $107 [3] - Citi increased its price target to $125 from $120 [3] - The consensus target compiled by Visible Alpha is $117, an 8% premium over Wednesday's closing price of $108.18 [3] Industry Trends - Accelerating data growth is pushing up demand for storage both in the cloud and on-premises, benefiting Seagate [2] - The company is ramping up production of its high-capacity hard drives based on HAMR (heat-assisted magnetic recording) technology, which analysts see as a tailwind going into the back half of the year [3][4]

Earnings and Financial Performance - Seagate Technology reported Q2 FY25 revenue of $2 33 billion, beating consensus estimates [1] - The company expects Q3 adjusted EPS of $1 70 at the midpoint, slightly above analyst estimates of ~$1 60 [2] - Q3 revenue guidance is $2 10 billion at the midpoint, in line with analyst estimates [2] - March quarter revenues declined by $200 million due to previously discussed supply chain issues [2] - The analyst raised CY25 EPS estimate to $8 85 from $8 60, above consensus of $8 06 [4] - CY26 EPS estimate remains unchanged at $11 00, above street view of $9 82 [4] Market and Industry Outlook - Management highlighted limited supply additions, build-to-order contracts, and long lead times of up to 52 weeks as factors supporting sustained demand [3] - Strong AI-driven EB growth is contributing to the positive outlook [3] - Some investors express concerns about a cyclical peak after six quarters of Nearline revenue recovery [3] Technology and Product Development - Management remains highly optimistic about the HAMR (Heat-Assisted Magnetic Recording) ramp in H2 FY25 [3] - HAMR technology is expected to drive incremental share gains, higher drive density, and improved gross margins [3] Stock Performance - STX shares increased by 7 97% to $109 32 at the last check on Wednesday [4]