Key Takeaways
- Seagate shares fell 8% today as investors sold data center and storage stocks after the midterm elections, with Western Digital down too.
- Seagate has little exposure to flash memory prices, and most of its drive supply is allocated under contracts through 2028, so the drop looks overdone.
- Seagate’s revenue rose 61% in the September quarter, and analysts expect its normalized EPS to more than quadruple from fiscal 2026 to fiscal 2028.
- Seagate traded at half its five-year average forward P/E before today, and the next test is pricing on its 2028 supply.
Seagate Technology (STX) fell 8% today, with no news of its own, while the broader market rallied.
Tuesday’s midterm results had Democrats projected to win both the House and the Senate. Investors sold the AI data center build-out on worries about tougher rules, including fears of a data center moratorium in Texas. Quanta Services (PWR) fell 12% and Comfort Systems USA (FIX) dropped 15%.
Storage stocks had a second worry: signs that rising memory prices are hurting parts of the hardware market. Western Digital (WDC), the other big hard drive maker, fell 6%.
Seagate’s memory exposure is small
For the hard drive makers, memory is mostly a cost. Western Digital CFO Kris Sennesael said on its Oct. 22 call that the company uses “some DRAM and some NAND inside our hard disk drives.”
That cost hasn’t dented Western Digital’s outlook. It guided its December-quarter non-GAAP gross margin to 60%-61%, up from 58.1% in the September quarter, with revenue up 66%-72% year over year. So I read its drop as election worry about data centers.
TIKR tracks 26 analysts on Seagate Technology. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Seagate Technology, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Seagate Technology’s Analyst Ratings
The demand is already signed up
CEO Dave Mosley said on Seagate’s fiscal first-quarter call last week that “the vast majority of our nearline exabyte supply is now allocated under long-term supply agreements through calendar 2028.”
That came with a record quarter: revenue up 61% to $4.23 billion, and guidance of $4.8 billion for the December quarter. Analysts expect normalized EPS to climb from $15.58 in fiscal 2026 to $65.34 in fiscal 2028:
Nothing in today’s news gives me a reason to expect cuts.
Priced for a slowdown
After a 30% drop in a month, Seagate traded at 13x forward earnings earlier this week, half its five-year average of 26x:
Today’s drop takes it even lower.
Quanta and Comfort Systems need new data center projects approved. Seagate’s customers have already signed up for its drives through 2028. The way I see it, Seagate got sold today for a memory problem it mostly doesn’t have, and at this multiple, I’d buy the drop.
Of course, Seagate’s contracts set prices only through calendar 2027, and its 2028 prices get settled over the next few quarters. A slower build-out would show up there first, so watch Seagate’s December-quarter report early next year.
So what is Seagate stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Seagate could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
