On Wednesday, Northland analysts increased their price target on Seagate Technology shares (NASDAQ:STX) to $160 from the previous $144, while retaining an Outperform rating on the stock.
The revision follows Seagate Technology's report of higher-than-expected earnings, attributed primarily to an increase in gross margins (GM). The company, currently valued at $21.4 billion, has demonstrated strong momentum with a 17.3% year-to-date return, according to InvestingPro data.
The analysts at Northland anticipate further expansion of Seagate's gross margins, which currently stand at 28.9%, propelled by the company's areal density roadmap. This technology is expected to enable Seagate to command premium pricing for its high-capacity drives and to reduce costs for its low-capacity drives effectively.
The analysts noted that the demand for Seagate's products remains robust and that the company's build-to-order model is enhancing visibility into its operations. InvestingPro analysis reveals that Seagate is trading at a low P/E ratio relative to its near-term earnings growth, with analysts expecting sales growth in the current year.
In their comments, the Northland analysts elaborated on the reasons behind their positive outlook. "STX reported an upside in earnings driven by higher GM. We expect further GM expansion driven by its areal density roadmap, which drives premium pricing for high-capacity drives and the ability to cost-reduce low-capacity drives," they explained.
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The strong demand for Seagate's offerings is also a key factor behind the analysts' confidence. They concluded by reinforcing their Outperform rating, stating, "Demand remains strong, and the build-to-order model is driving increased visibility. We reiterate our OP and lift our estimates and PT."
The new price target of $160 represents Northland's expectations for Seagate Technology's stock performance, reflecting their analysis of the company's recent earnings and future prospects in the data storage market.
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