Seagate Outpaces Industry in 6 Months: How to Play the Stock

Core Insights - Seagate Technology Holdings plc's shares have increased by 118.3% over the past six months, significantly outperforming the Zacks Computer-Integrated Systems industry's growth of 48.4% and the S&P 500's growth of 16.7% [1][8]. Financial Performance - The company reported better-than-expected results, driven by aggressive capital returns and advancements in hard-disk technology [2]. - Seagate's latest quarterly results showed healthy revenues and strong EPS, with management guiding continued demand for high-capacity drives in data centers [5]. - For fiscal Q2, revenues are expected to be $2.7 billion, indicating a 16% year-over-year improvement [15]. Market Position - Seagate has outperformed industry peers like Micron Technology and Advanced Micro Devices, which have seen stock increases of 97.4% and 63.4%, respectively, over the same period [3]. - The company is positioned well for long-term growth due to its business transformation and strong product pipeline, focusing on Data Center and Edge IoT markets [12]. Technological Advancements - Seagate has introduced new Exos JBOD systems designed for data-heavy workloads, offering up to 3.2 petabytes of capacity [2]. - The company is advancing its HAMR (Heat-Assisted Magnetic Recording) technology, with expectations for HAMR drives to capture a 50% exabyte share by the second half of 2026 [11]. Demand Drivers - Strong demand from global cloud customers and accelerating AI workloads are driving data center revenues, which now represent the majority of sales [5][10]. - The shift towards AI is increasing the economic value of data and storage, leading to higher demand for Seagate's high-capacity nearline drives [10]. Capital Returns and Shareholder Value - Seagate has returned capital to shareholders through dividends of $153 million and share repurchases of 153,000 shares for $29 million [14]. - The company aims to return a minimum of 75% of its free cash flow to shareholders over the long term [14]. Estimate Revisions - Earnings estimates for fiscal 2026 have increased by 7% to $11.26, while estimates for fiscal 2027 have risen by 8.6% to $14.88 [19]. Valuation Metrics - The company's shares currently trade at a price/earnings ratio of 23.34 for forward earnings, compared to 22.12 for the industry [20]. Growth Drivers - Seagate is supported by multi-year growth drivers, including rapid AI-led data expansion and increasing cloud storage requirements, positioning the company for both near-term momentum and long-term value creation [21].