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Analysts Are Updating Their Seagate Technology plc (NASDAQ:STX) Estimates After Its Third-Quarter Results

Simply Wall St
·3 mins read

A week ago, Seagate Technology plc (NASDAQ:STX) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. The company beat expectations with revenues of US$2.7b arriving 2.8% ahead of forecasts. Statutory earnings per share (EPS) were US$1.22, 3.2% ahead of estimates. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for Seagate Technology

NasdaqGS:STX Past and Future Earnings April 27th 2020
NasdaqGS:STX Past and Future Earnings April 27th 2020

Following last week's earnings report, Seagate Technology's 25 analysts are forecasting 2021 revenues to be US$10.3b, approximately in line with the last 12 months. Statutory earnings per share are forecast to dive 31% to US$4.73 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$10.3b and earnings per share (EPS) of US$4.92 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

The consensus price target held steady at US$53.92, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Seagate Technology analyst has a price target of US$70.00 per share, while the most pessimistic values it at US$36.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. One thing that stands out from these estimates is that shrinking revenues are expected to moderate from the historical decline of 5.0% per annum over the past five years.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Seagate Technology. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Seagate Technology's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$53.92, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Seagate Technology going out to 2022, and you can see them free on our platform here..

And what about risks? Every company has them, and we've spotted 3 warning signs for Seagate Technology you should know about.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.