Seagate Technology (STX) Surges 7.4%: Is This an Indication of Further Gains?

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Seagate STX shares rallied 7.4% in the last trading session to close at $94.72. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 0.5% loss over the past four weeks.

The increase in share price is largely attributable to strengthening analysts’ confidence owing to recovery in mass capacity demand.

Improvement in mass capacity demand is being driven by higher nearline cloud demand. Higher sales to cloud customers across United States and stabilized enterprise demand is driving nearline cloud revenues for Seagate. Healthy momentum witnessed for SSD products is driving the non-HDD segment’s revenue growth.

In the last reported quarter, non-GAAP revenues of $1.555 billion improved 7% sequentially and remained within management’s guidance of $1.55 billion (+/- $150 million).

Management expects secular trends and innovations in driving up aerial density to benefit mass capacity storage.

STX also noted that the launch of Mozaic 3+ hard drive platform earlier in the year, which features Heat-Assisted Magnetic Recording technology, has positioned it well to capture higher market share in the mass capacity storage solutions  arena.

Seagate has begun shipping initial volumes of 24TB CMR / 28TB SMR drives in December 2023. It is on track to begin volume ramp for HAMR 3+TB per disk platform (currently in qualification with initial launch partner) in the March quarter, with a target to ship about 1 million units in the first half of 2024.

For fiscal third quarter, management expects incremental improvements in mass capacity demand from cloud and enterprise clients to more than offset seasonal downtick in demand in both the VIA and legacy markets.

STX anticipates third-quarter fiscal 2024 revenues to be $1.65 billion (+/- $150 million).

This electronic storage maker is expected to post quarterly earnings of $0.19 per share in its upcoming report, which represents a year-over-year change of +167.9%. Revenues are expected to be $1.65 billion, down 11.6% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Seagate Technology, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on STX going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Seagate Technology is a member of the Zacks Technology Services industry. One other stock in the same industry, Blade Air Mobility, Inc. BLDE, finished the last trading session 0.8% higher at $2.64. BLDE has returned -22.3% over the past month.

Blade Air Mobility's consensus EPS estimate for the upcoming report has changed +4.8% over the past month to -$0.13. Compared to the company's year-ago EPS, this represents a change of +7.1%. Blade Air Mobility currently boasts a Zacks Rank of #3 (Hold).

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