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Evercore ISI analyst Amit Daryanani reiterated an Outperform on Seagate Technology Holdings Plc (NASDAQ:STX) with a price target of $110.
While early in the quarter, Seagate is positioned to print upside for March-quarter and likely guide June and beyond ahead of street expectations, as per the analyst.
The strength here is a reflection of broad-based demand that could also enable upside for other HDD players, he said.
Also Read: Micron, Seagate, Western Digital Poised for Upswing, Driven by NAND Price Surge, Analyst Forecasts
The analyst highlighted that cyclical recovery in the cloud continues to gain traction and shows sustained momentum.
He expects the recovery to be broader than just US Hyperscalers, as there are initial signs of demand improvement with Chinese vendors.
Given the logical capacity constraints, the analyst also flagged pricing discipline across the HDD market, which should ensure Seagate sees some vital sequential improvements in gross margin from better pricing and leverage.
While March tends to be seasonally weak on the enterprise side, the analyst noted that demand has been better than expected this time.
The analyst noted that HAMR qualifications are going well, but the real upside will be more substantial gross margins as they scale into 40TB HAMR units in early and mid-2025.
The analyst said that 40TB HAMR HDDs have comparable BOM vs. 30TB units but clearly richer ASP.
The analyst noted room for upside vs. street expectations of $1.65 billion and $0.25 and given the leverage tailwinds, demand, and margins are tracking ahead of street expectations and the Seagate guide.
Cantor Fitzgerald analyst C J Muse reiterated Seagate with a Neutral and a $95 price target.
Investors can gain exposure to Seagate via First Trust Dorsey Wright Momentum & Dividend ETF (NASDAQ:DDIV) and IShares Future Cloud 5G And Tech ETF (NYSE:IDAT).
Price Action: STX shares traded higher by 0.27% at $98.65 on the last check Tuesday.
Also Read: Sony and Seagate to Increase HDD Capacity to 30TB, Aim to Meet Growing Data Center Demands
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