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Seagate (STX) Raises Q4 Guidance Backed By Robust Demand

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Seagate Technology Holdings PLC STX recently raised its guidance for fourth-quarter fiscal 2021, driven by solid demand for its solutions in the mass capacity markets and distribution channel.

Seagate now expects fiscal fourth-quarter revenues to be $2.95 billion (+/- 150 million) compared with earlier revenue projection of $2.85 billion (+/- 150 million). Meanwhile, non-GAAP earnings per share for fiscal fourth quarter is now projected to be $1.85 per share (+/- 15 cents) compared with earlier guidance of $1.60 per share (+/- 15 cents).

In the past year, shares of Seagate have skyrocketed 82.3% compared with industry’s return of 11.9%.

Opportunities Aplenty For Seagate

Robust cloud data center demand and a recovering enterprise market is driving demand for the company’s mass capacity storage solutions, along with increasing investments in digital transformation by business enterprises.

Seagate Technology Holdings PLC Price and Consensus

Seagate Technology Holdings PLC Price and Consensus
Seagate Technology Holdings PLC Price and Consensus

Seagate Technology Holdings PLC price-consensus-chart | Seagate Technology Holdings PLC Quote

The data center business is thriving owing to rapid proliferation of cloud-based solutions and accelerated 5G network deployment.

Further, increasing implementation of Artificial Intelligence (AI) and data analytics solutions as well as strength in video and image applications market is leading to strong uptake of the company’s nearline and mission-critical drives. The company began shipping its 20-terabyte HAMR drives in November 2020.

In third-quarter fiscal 2021 conference call, Seagate noted that it expects total addressable market for mass capacity storage solutions to be $26 billion by 2026.

Further, continued momentum in PC shipments, owing to remote work and online education trends, bodes well for Seagate’s hard disk drive (HDD) solutions. In first-quarter 2021, PC shipments soared 32% to 69.9 million units per a Gartner report.

The company’s SSD (solid state drive) portfolio is witnessing strong uptake due to exponential growth in digital data and increasing cloud migration activity. Notably, SSDs are being utilized by data centers, owing to reduction in latency, which allows faster response to real-time applications.

According to a Mordor Intelligence report, the global SSD market is projected to witness a CAGR of 14.94% between 2021 and 2026 and reach $80.34 billion.

Nonetheless, supply chain constraints owing to the ongoing pandemic as well as increasing costs and stiff competition from the likes of Western Digital WDC remain persistent overhangs.

Zacks Rank & Stocks to Consider

At present, Seagate carries a Zacks Rank #2 (Buy).

Some better-ranked stocks in the broader technology sector worth consideration are Facebook FB and Silicon Motion Technology SIMO. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Facebook and Silicon Motion is currently pegged at 20.1% and 8%, respectively.

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