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Reasons to Retain Seagate (STX) in Your Portfolio For Now

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Seagate Technology Holdings plc STX performance is driven by robust adoption of its mass capacity storage solutions, especially near-line products boosted by healthy cloud data center demand.

The company has an impressive Growth Score of B. This style score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth.

Seagate’s fiscal 2022 and fiscal 2023 earnings are expected to increase 50.7% and 15.5%, respectively, year over year. Revenues are anticipated to rise 11% and 5.8% in fiscal 2022 and fiscal 2023, respectively.

Seagate outpaced estimates in three out of the trailing four quarters, delivering an earnings surprise of 3.2%, on average.

The company reported third-quarter fiscal 2022 non-GAAP earnings of $1.81 per share, which increased 22% from the year-ago quarter’s figure. Non-GAAP revenues of $2.802 billion outpaced the Zacks Consensus Estimate by 0.9%. The figure rose 3% on a year-over-year basis.

Seagate Technology Holdings PLC Price

 

Seagate Technology Holdings PLC Price
Seagate Technology Holdings PLC Price

Seagate Technology Holdings PLC price | Seagate Technology Holdings PLC Quote

 

Amid the ongoing volatility, Seagate stock has been more resilient compared with the Zacks industry. The stock has lost 15.4% in the past year compared with a 72% plunge of the industry.

STX stock is down 37% from its 52-week high level of $117.67 on Jan 5, 2022, making it relatively affordable for investors.

Strong Fundamentals

Healthy demand for its mass capacity storage solutions, especially nearline products from cloud data center customers, is a major growth driver. The company’s mass capacity portfolio is expected to reflect incremental gains from multiple varieties of its 20-terabyte drives in addition to 18 terabyte (TB) drives.

In the last reported quarter, nearline revenue surged 24% year over year, owing to the strong uptake of 18 terabyte drives and initial shipments of 20 TB drives.
Healthy demand for solid-state drives or SSDs in data centers and increased gaming activities is driving demand for gaming SSDs. Strengthening enterprise and video and image applications markets also augur well.

Seagate’s expansion strategy for its Lyve Cloud bodes well. In February 2021, Seagate debuted the Lyve Cloud platform. Lyve Cloud is the company’s storage-as-a-service platform (only S3-compatible) intended primarily to help business organizations manage exponential unstructured data growth.

The company recently launched new Lyve Cloud regions in the United States in Dallas, Oklahoma City and Washington DC) and the new regions in Germany, India, Japan and the U.K. These new regions will complement the company’s Singapore Lyve region and the existing regions in the United States, taking the total to 10 regions with 16 availability zones.

The Legacy segment is affected by lower PC and legacy mission-critical drives sales. Supply chain disruptions and increases in costs (freight and logistics) due to COVID-19 amid increasing competition in the disk drive space remain major concerns for this Zacks Rank #3 (Hold) stock.

Stocks to Consider

Some top-ranked stocks from the broader technology sector worth consideration are InterDigital IDCC, PTC PTC and Vishay Intertechnology VSH. While PTC and InterDigital sport a Zacks Rank #1, Vishay Intertechnology carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vishay Intertechnology’s 2022 earnings is pegged at $2.68 per share, rising 10.3% in the past 60 days. The long-term earnings growth rate is anticipated to be 22.7%.

Vishay Intertechnology’s earnings beat the Zacks Consensus Estimate in the last four quarters, the average surprise being 5%. Shares of VSH have declined 18.2% in the past year.

The Zacks Consensus Estimate for InterDigital 2022 earnings is pegged at $3.33 per share, up 46.1% in the past 60 days. IDCC’s long-term earnings growth rate is pegged at 15%.
InterDigital’s earnings beat the Zacks Consensus Estimate in all the preceding four quarters, with the average being 141.1%. Shares of IDCC have lost 12.2% of their value in the past year.

The Zacks Consensus Estimate for PTC’s fiscal 2022 earnings is pegged at $4.55 per share, rising 2.9% in the past 60 days. The long-term earnings growth rate is anticipated to be 11.8%.

PTC’s earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average being 29.4%. Shares of PTC have grown 20.8% in the past year.


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