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Shares of Seagate Technology PLC STX have been performing well of late. The company's shares have returned 49.5% in the past year, substantially outperforming industry's rally of 17.2%.
If you haven't taken advantage of the share price appreciation yet, its time you hold the stock in your portfolio as it looks promising and is poised to carry the momentum ahead.
What's Working in Seagate's Favor?
With the huge transformations in the storage industry, mobile cloud is taking the center stage. This in turn has bolstered the deployment of high-capacity mass storage products which is beneficial for Seagate.
Seagate recently announced that IronWolf, IronWolf Pro, Barracuda Pro, SkyHawk and Exos X14 — which are part of the Guardian Series of hard disk drives (HDDs) — are now available in capacity of up to 14 terabyte (TB).
Market research firm IDC forecasts that by 2025, the global datasphere will grow to 163 zettabytes (trillion gigabytes), which is ten times the 16.1 zettabytes (ZB) of data generated in 2016. More importantly, almost 20% of this will be critical to daily lives and nearly 10% of that will be hypercritical.
This massive volume of data presents significant growth opportunity for enterprises. However, effective storage is absolutely essential to properly harness this data. This presents significant growth opportunity for Seagate in the long term.
Further, the company’s expanding portfolio is likely to boost its competitive position against Western Digital WDC.
The company is trying to focus less on the mission-critical 15K and sub-1-terabyte client consumer markets. Management anticipates these markets to eventually converge with either silicon-based memory or cloud storage, where it is already expanding footprint. Notably, as percentage of total revenues, the products accounted for lesser than 8%.
Further, PC market stabilization as reflected in the latest reports from Gartner and IDC are a positive. Moreover, collaborations with the likes of Tencent and Baidu BIDU are anticipated to boost Seagate’s presence in China.
Seagate delivered a positive average earnings surprise of 9.1% in the trailing four quarters. Further, it has a long-term expected EPS growth rate of 12.4%.
We expect the trend to sustain and drive the overall financial performance of this Zacks Rank #3 (Hold) stock.
A better-ranked stock from the broader technology sector is NetApp, Inc. NTAP, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NetApp has a long-term earnings growth rate of 14.13%.
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