Seagate Earnings Could Grow 10 Times in Just 2 Years, Analyst Says. Here's Why. -- Barrons.com

By Eric J. Savitz

Seagate stock got a ringing endorsement Wednesday that included a robust earnings forecast.

Wedbush analyst Matt Bryson lifted his rating on the disk-drive provider to Outperform from Neutral and set a price target of $100.

Seagate Technology Holdings stock was 0.5% higher on Wednesday at $86.22.

Bryson writes in a research note that he sees improving demand for "nearline" drives -- which are used by enterprise customers for bulk storage -- a factor which he says provides upside to current estimates.

The analyst is also bullish on the long-term outlook for the company's HAMR drives, an acronym for Heat-Assisted Magnetic Recording, a technology that uses lasers to heat disks before writing data, allowing more data to be stored in the same location.

While there have been some manufacturing issues with Seagate's HAMR drives, Bryson's view is the pending ramp-up of production should "augment favorable nearline trends."

According to Bryson, current nearline hard-drive supply is falling short of end demand, and he sees only modest shipment increases in the June quarter from the leading suppliers -- Seagate and Western Digital.

A recent holdup in production of HAMR drives has involved a component issue, rather than a larger technology problem, he notes.

"While we believe there are still some manufacturing challenges that likely need to be resolved to get the full benefit of HAMR, we believe the fundamental issues are behind" the company, he writes.

Bryson sees HAMR drives vastly improving Seagate's earnings ahead. He forecasts earnings of $1.02 a share for the June 2024 fiscal year, $6.94 a share in fiscal 2025, and $11.68 a share in fiscal 2026.

If he's right about the outlook two years out, he adds, Seagate's results "could support a far more substantial price target even assuming multiple compression."

Write to Eric J. Savitz at eric.savitz@barrons.com

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May 01, 2024 11:06 ET (15:06 GMT)

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