Word: FY’24 resulted in June 2024
Seagate stock (NASDAQ: STX), an organization specializing within the design, manufacture, and distribution of digital knowledge storage options and merchandise, is scheduled to report its first-quarter outcomes on Tuesday, October 22. We count on STX’s inventory to seemingly see little to no motion with income and earnings matching expectations in fiscal Q1. Seagate has seen a 34% rise thus far this 12 months – leaping from ranges of $85 then to $112 now – vs. a rise of about 22% for the S&P 500 over this era. Compared, its peer – Western Digital stock (NASDAQ: WDC) – has seen a 29% rise over this era. Each STX and WDC are seeing a restoration in storage demand, amid the AI increase. This resulted in a shift to increased capability drives and improved pricing.
Seagate is now targeted on HAMR merchandise, which may final for a for much longer life than that of typical disks. It’s delivery onerous disks of 30 TB with the brand new Warmth Assisted Magnetic Recording expertise. With the demand anticipated to choose up for HAMR disks, Seagate is well-positioned to learn from the identical. AI is driving demand for reminiscence and storage to help elevated knowledge processing. The corporate stands to learn from its mass-capacity drives, given the rising want for enterprises to seize extra knowledge. Seagate has additionally seen its profitability enhance currently. Its working margin fell from 14% in FY 2021 to 1% in FY 2023, however recovered to six% in FY 2024. Going ahead, the corporate’s working margin is anticipated to enhance additional.
Traders have rewarded STX inventory, because of the rebound in its storage product gross sales and the current growth of revenue margins. Nevertheless, the rise in STX inventory during the last 3-year interval has been removed from constant, with annual returns being significantly extra unstable than the S&P 500. Returns for the inventory had been 88% in 2021, -51% in 2022, and 69% in 2023. In distinction, the Trefis High Quality (HQ) Portfolio, with a group of 30 shares, is significantly much less unstable. And it has outperformed the S&P 500 annually over the identical interval. Why is that? As a bunch, HQ Portfolio shares offered higher returns with much less danger versus the benchmark index; much less of a roller-coaster journey as evident in HQ Portfolio efficiency metrics. Given the present unsure macroeconomic surroundings round fee cuts and a number of wars, may STX face an analogous state of affairs because it did in 2022 and underperform the S&P over the following 12 months – or will it see a powerful leap?
Our forecast signifies that Seagate’s Valuation is $118 per share, which is nearly 6% increased than the present market value. Take a look at our interactive dashboard evaluation on STX’s Earnings Preview: What To Anticipate in Q1? for extra particulars.
(1) Revenues and Earnings anticipated to return in step with the consensus estimates
Trefis estimates Seagate’s FQ1 2025 revenues to be $2.2 Bil, matching the market expectations. In This autumn 2024, Seagate’s income grew 18% y-o-y to $1.9 billion, benefiting from a rebound in cloud demand each within the U.S. and China and leading to increased exabyte development. Throughout fiscal 12 months 2024, the corporate shipped 398 exabytes of HDD storage capability, in comparison with 441 exabytes it shipped within the prior 12 months interval. Nevertheless, for This autumn, the variety of exabytes of HDD storage shipped grew by 15% sequentially. This development will seemingly be seen within the coming quarters, with a broader restoration in storage demand, and the corporate’s concentrate on HAMR merchandise. We count on Seagate’s income to develop 40% y-o-y to $9.2 billion in 2025. STX’s FQ1 2025 earnings per share (EPS) is anticipated to return in at $1.47 per Trefis evaluation, additionally in step with the consensus estimate.
(2) Inventory value estimate much like the present market value
We estimate Seagate’s Valuation to be $118 per share, reflecting over 5% upside from present ranges of round $112. The corporate’s P/S ratio has been in a variety of 1.2x to three.3x previously three years. This may be attributed to a big 37% fall in gross sales in fiscal 2023 and one other 11% in fiscal 2024 (fiscal ends in June), owing to decrease quantity and value erosion amid a big decline in storage demand. Our forecast of $118 is predicated on a 16.9x price-to-earnings a number of and adjusted earnings of $6.95 per share in FY 2025.
It’s useful to see how Seagate’s friends fare on metrics that matter. You’ll discover different beneficial comparisons for corporations throughout industries at Peer Comparisons.
Whereas buyers have their fingers crossed for a gentle touchdown for the U.S. economic system, how dangerous can issues get if there’s one other recession? Our dashboard How Low Can Shares Go Throughout A Market Crash captures how key shares fared throughout and after the final six market crashes.
| Returns | Oct 2024 MTD [1] |
2024 YTD [1] |
2017-24 Whole [2] |
| STX Return | 2% | 34% | 317% |
| S&P 500 Return | 1% | 22% | 161% |
| Trefis Strengthened Worth Portfolio | 3% | 18% | 789% |
[1] Returns as of 10/21/2024
[2] Cumulative whole returns for the reason that finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
