STX Stock Up 34% in a Year on Solid Demand Trends: Should You Buy?

Zacks11-13

Seagate Technology Holdings plc STX shares have been performing well on the trading front, with the stock gaining 33.7% in the past year compared with the sub-industry’s growth of 32.7%. The uptrend ...

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The company is witnessing an increasing demand for its mass capacity solutions. STX’s earnings beat estimates in all of the last four quarters, delivering an average surprise of 85.1%.Despite strong gains, STX is still down 13.5% from its 52-week high of $115.32, reached on Oct. 15, 2024. Does this indicate a buying opportunity?Let’s dive into STX’s prospects and determine your portfolio's best course of action.In the last reported quarter, mass capacity revenues surged 70% year over year and 21% sequentially, owing to stronger nearline cloud demand and increasing nearline enterprise sales. Its mass capacity exabyte shipments now represent more than 93% of HDD exabyte shipments.Seagate expects HAMR to aid in exp","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"STX":"希捷科技","BK4588":"碎股","LU1861215975.USD":"贝莱德新一代科技基金 A2","LU0006061336.USD":"Blackrock US Small and MidCap Opportunities A2 USD","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H","LU1035773651.USD":"AB SICAV I - GLOBAL VALUE PORTFOLIO \"AD\" (USD) INC","NTAP":"美国网存","LU0081259029.USD":"UBS (LUX) EQUITY FUND - TECH OPPORTUNITY \"P\" (USD) ACC","BK4512":"苹果概念","SG9999001440.SGD":"United Global Dividend Equity Fund A SGD Dist","PSTG":"Pure Storage Inc","LU1069347547.HKD":"AB SICAV I - GLOBAL VALUE PORTFOLIO \"AD\" (HKD) INC","LU0963586101.USD":"ALLIANZ GLOBAL SMALL CAP EQUITY \"AT\" ACC","BK4170":"电脑硬件、储存设备及电脑周边","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","LU2360107168.USD":"BGF NEXT GENERATION TECHNOLOGY \"A4\" (USD) INC","LU2290526834.HKD":"BGF NEXT GENERATION TECHNOLOGY \"A2\" (HKDHDG) ACC","BK4585":"ETF&股票定投概念","IE00B19Z9P08.USD":"LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (USD) INC","IE00B19Z9Z06.USD":"Legg Mason ClearBridge - US Aggressive Growth A Acc USD","WDC":"西部数据"},"translate_title":"由于强劲的需求趋势，STX股价一年内上涨34%：您应该购买吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WDC":1,"STX":1,"PSTG":1,"NTAP":1},"content_text":"Seagate Technology Holdings plc STX shares have been performing well on the trading front, with the stock gaining 33.7% in the past year compared with the sub-industry’s growth of 32.7%.\nThe uptrend is driven by Seagate’s impressive top-line performance in the past few quarters. The company is witnessing an increasing demand for its mass capacity solutions. STX’s earnings beat estimates in all of the last four quarters, delivering an average surprise of 85.1%.\nOne-Year Price Performance\nImage Source: Zacks Investment Research\nDespite strong gains, STX is still down 13.5% from its 52-week high of $115.32, reached on Oct. 15, 2024. Does this indicate a buying opportunity?\nLet’s dive into STX’s prospects and determine your portfolio's best course of action.\nMass Capacity Demand: Key Growth Driver\nSeagate, a leader in data storage solutions, is well-poised for strong growth amid favorable mass capacity demand trends despite stiff competition from prominent players in the storage space like NetApp NTAP, Pure Storage PSTG and Western Digital Corporation WDC.\nIn the last reported quarter, mass capacity revenues surged 70% year over year and 21% sequentially, owing to stronger nearline cloud demand and increasing nearline enterprise sales. Its mass capacity exabyte shipments now represent more than 93% of HDD exabyte shipments.\nNearline cloud demand was mainly driven by cloud service providers (“CSPs”) across the United States. Seagate added that it has been witnessing positive demand trends globally. Management anticipates continued improvement in the fiscal second quarter, owing to shipments for the latest high-capacity products expanded across global CSP and enterprise customers. Also, cloud service providers are focusing more on the development and deployment of AI applications while building cloud infrastructure. Seagate believes HDDs will play a key role in enabling these stages of the AI adoption curve and expects HDD demand to pick up pace going ahead.\nManagement anticipates second-quarter fiscal 2025 revenues to be $2.3 billion (+/- $150 million). STX expects continued momentum in mass capacity demand, caused by strengthening nearline demand from global cloud customers and improvement in the enterprise & OEM markets. This increase in mass capacity revenues is likely to offset lower revenues from legacy and other markets.\nMozaic Platform: A Game Changer for STX?\nSeagate expects secular trends and innovations to drive up aerial density to benefit mass capacity storage. Management also noted that the launch of the Mozaic 3+ hard drive platform earlier in the year, which featured HAMR (heat-assisted magnetic recording) technology, positioned it well to capture share in the mass capacity storage solutions market.\nSeagate expects HAMR to aid in exploiting megatrends like AI and machine learning, which will drive long-term demand for cost-effective mass-capacity storage solutions. The company has been ramping up its 24TB CMR / 28TB SMR drives, and these now represent the second-highest revenue product, contributing more than 20% of total nearline revenues.\nSeagate added adoption of Mozaic 3+ was gaining steam. The qualification with the lead CSP customer is progressing well and it has expanded qualifications with several other cloud and enterprise customers in the current quarter. The company anticipates delivering capacity increases through further aerial density gains for its Mozaic 4+ platform. This will lead to lower savings for its customers.\nSTX’s Improving Profitability\nFocus on high-capacity HDDs and cost efficiencies in a healthy industry supply-demand environment is driving margin expansion for Seagate. In the last reported quarter, non-GAAP gross margin increased to 33.3% from 19.8% in the prior-year quarter. Non-GAAP income from operations totaled $442 million, up from $40 million a year ago. Non-GAAP operating margin increased to 20.4% from 2.8% in the year-earlier quarter.\nImage Source: Zacks Investment Research\nGoing ahead, STX expects gross margin is expected to benefit from a higher mix of mass capacity revenues and ongoing pricing actions. At the midpoint of the revenue guidance, management expects the non-GAAP operating margin to grow in the low-20s percentage range of revenues in the current quarter.\nDriven by strong revenue and margin performance, along with robust liquidity levels, STX raised its quarterly dividend by 3% to 72 cents.\nHowever, increasing expenses could drag down margin performance. This is especially true if top-line expansion fails to keep pace with mounting costs. In the last reported quarter, non-GAAP operating expenses were up 13% on a year-over-year basis to $281 million, primarily due to higher variable compensation, and for the current quarter, the same is expected to be 285 million.\nSTX’s Attractive Valuation\nSeagate presents a compelling investment opportunity with its attractive forward 12-month price-to-sales ratio of 2.12X, significantly lower than the industry average of 3.28X observed over the past year. Its forward 12-month price-to-sales ratio positions Seagate as a value-driven choice with significant upside potential.\nImage Source: Zacks Investment Research\nSTX Estimate Revision Activity\nThough estimates for the current quarter and next quarter have been marginally revised downwards, the same for the current and the next fiscal year have been revised upward by 3% and 3.5% in the past 60 days.\nImage Source: Zacks Investment Research\nHere’s Why STX Shares Are a Buy\nStrong financial performance, strategic initiatives, favorable demand trends, and appealing dividend policy make Seagate an attractive investment opportunity. Given the recent pullback from its 52-week high, investors have an opportunity to invest in this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.\nApart from a favorable rank, STX has a Growth Score of B. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 and a Growth Score of A or B offer solid investment opportunities.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nNetApp, Inc. (NTAP) : Free Stock Analysis Report\nWestern Digital Corporation (WDC) : Free Stock Analysis Report\nSeagate Technology Holdings PLC (STX) : Free Stock Analysis Report\nPure Storage, Inc. (PSTG) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2483880448"}