Rosenblatt Securities adjusted its outlook on Seagate Technology (NASDAQ:STX), a prominent data storage company, by increasing the price target to $140 from the previous $125, while reaffirming a Buy rating on the stock. This adjustment follows Seagate's recent financial performance which surpassed expectations, attributed to a surge in demand for Nearline drives from cloud service providers. Additionally, the company experienced an uptick in demand from Enterprise and Original Equipment Manufacturer (OEM) customers.
The report by Rosenblatt highlighted a significant rise in the average capacity per mass capacity drive, observing a 13% quarter-over-quarter and a 39% year-over-year increase. This trend is anticipated to persist, driven by the growing needs for data storage fueled by advancements in artificial intelligence (AI). The analyst expects that the demand for increased storage will continue to bolster Seagate's market position.
Seagate is also progressing with its Heat-Assisted Magnetic Recording (HAMR)-based drive qualifications, which are anticipated to commence broader shipments to customers by mid-2025. These HAMR-based drives are expected to positively impact Seagate's corporate gross margin. The firm's progress on this technology is a key factor in Rosenblatt's optimistic assessment.
In light of these developments, Rosenblatt has revised upwards its estimates for Seagate. The firm's analyst cited the company's strong earnings report and the promising outlook for its product offerings as the basis for the revised price target. Seagate's ability to meet the increasing demand for data storage appears to be a driving force behind the firm's positive valuation.
In other recent news, Seagate Technology has experienced significant developments. The company reported a non-GAAP gross margin of 33.3%, marking the highest level in over a decade, driven by strong performance in Nearline HDD products. Goldman Sachs (NYSE:GS) maintained a neutral rating on Seagate Technology, despite adjusting its non-GAAP EPS forecasts for the company for the calendar years 2024-2026, reducing them by an average of 10%.
Seagate Technology also reported robust quarterly results with revenues of $2.17 billion and earnings per share (EPS) of $1.58, surpassing anticipated figures. This success was driven by a substantial 49% increase in year-over-year revenue and a 55% rise in hard disk drive sales. Financial firms such as Citi, Evercore ISI, BofA Securities, Loop Capital, and Morgan Stanley (NYSE:MS) have revised their price targets for Seagate, reflecting an optimistic outlook on the company's financial performance.
In other company news, Seagate's shareholders approved executive pay and the re-allotment of shares during the recent Annual General Meeting. Additionally, Robert A. Bruggeworth, a member of the Board of Directors, announced he will not stand for re-election at the upcoming Annual General Meeting of Shareholders.
InvestingPro Insights
Seagate Technology's recent performance and future prospects align well with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 77.86% total return over the past year and a 31.92% return in the last six months. This performance supports Rosenblatt's bullish stance and increased price target.
InvestingPro Tips highlight that Seagate is expected to see sales growth in the current year, which aligns with the increased demand for Nearline drives from cloud service providers and enterprise customers mentioned in the article. Additionally, the company's status as a prominent player in the Technology Hardware, Storage & Peripherals industry underscores its position to capitalize on the growing data storage needs driven by AI advancements.
The company's financial health is further emphasized by its consistent dividend payments, which it has maintained for 14 consecutive years. This demonstrates Seagate's ability to generate stable cash flows, even as it invests in new technologies like HAMR-based drives.
For investors seeking a deeper understanding of Seagate's potential, InvestingPro offers 13 additional tips, providing a comprehensive analysis of the company's financial position and market outlook.
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