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On Monday, Mizuho (NYSE:MFG) Securities demonstrated confidence in Seagate Technology (NASDAQ:STX), with analyst Vijay Rakesh increasing the firm’s price target on the company’s shares to $110, up from the previous $100, while maintaining an Outperform rating. The stock, which has surged 13% in the past week and currently trades at $93.07, appears undervalued according to InvestingPro Fair Value analysis. The adjustment follows a recent investor call with Seagate’s CFO Gianluca Romano and SVP of Investor Relations Shanye Hudson (NYSE:HUD).
During the call, several key points were discussed, including the successful progress of Heat-Assisted Magnetic Recording (HAMR) technology, which has already contributed to margin growth in the March quarter. The company, which maintains a healthy gross profit margin of 33.8% and generates $773 million in free cash flow, anticipates further margin expansion as production volumes rise. Seagate is also concentrating on technology transitions and areal density improvements to boost capacities, which should keep capital expenditures low and support robust free cash flow.
Despite a longer-than-anticipated ramp-up for 3TB HAMR drives, Mizuho sees a faster time-to-market for 4TB drives and expects a transition to 5TB drives within 18 to 24 months following the 4TB version. Additionally, Seagate has not been immediately affected by tariffs since all U.S. final assembly is conducted in Thailand.
The firm reiterates its Outperform rating for Seagate Technology and sees the company as well-positioned to capture market share with the HAMR technology ramp-up, strength in nearline storage, and improved margin leverage. With 14 analysts recently revising earnings estimates upward and the company maintaining a 3.09% dividend yield, investors can access more detailed analysis through InvestingPro’s comprehensive research report, which is part of its coverage of 1,400+ US stocks. Looking ahead, Seagate is set to host an investor day on May 22, where it is anticipated to unveil a new long-term financial model and product roadmap.
In other recent news, Seagate Technology has reported financial results that surpassed expectations, with a notable year-over-year sales increase of 30%. The company has projected continued sales growth for the upcoming June quarter, driven by robust demand for its Nearline products. Analysts at Benchmark have maintained a Buy rating for Seagate, with a price target of $120, citing improvements in profit margins and cash flow as key factors. Cantor Fitzgerald also adjusted its outlook, raising the price target to $110 while keeping a Neutral rating, reflecting confidence in Seagate’s performance and its build-to-order strategy.
Mizuho analysts have revised their price target for Seagate down to $95 but retained an Outperform rating, highlighting the introduction of Heat-Assisted Magnetic Recording (HAMR) technology as a potential catalyst for market share gains. Meanwhile, Citi analysts adjusted their price target to $115 from $125, maintaining a Buy rating on the stock. This revision accounts for the upcoming global minimum tax and is balanced by higher gross margin assumptions due to favorable industry dynamics and the ramp-up of HAMR technology.
Seagate’s strategic advancements with HAMR technology are expected to enhance its market position, particularly with the introduction of 36TB drives to cloud service providers. The company’s focus on Hard Disk Drives (HDDs) remains strong, with no signs of inventory buildup among cloud customers, according to Citi’s analysis. Overall, Seagate’s recent developments indicate a positive outlook, supported by ongoing demand in the data storage sector.
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