What's Next for Seagate Stock After a 241.8% Stellar Run in a Year?
Seagate Technology Holdings plc’s STX stock has delivered a powerful performance, climbing 241.8% in the past year, exceeding the Zacks Computer-Integrated Systems industry’s, the Zacks Computer & Technology sector and the S&P 500’s growth of 95.3%, 29.7% and 21.9%, respectively.Image Source: Zacks Investment ResearchThe company has also surpassed its industry peers like International Business Machines Corporation IBM and Advanced Micro Devices AMD, which have risen 39.9% and 73.1%, respectively, over the past year. At the same time, its prime adversary in the HDD space, Western Digital Corporation WDC, has soared 223.2%.Western Digital is a diversified storage company offering a broad portfolio of HDD and NAND-based SSD solutions used across desktop PCs, servers, NAS devices, gaming consoles, DVRs and other consumer electronics. AMD delivers industry-leading total cost of ownership, efficiency and advanced AI capabilities, enabling high performance, reliability and scalability across data centers, the edge and end-user environments. IBM has gradually evolved as a provider of cloud and data platforms, besides offering advanced information technology solutions, computer systems, quantum computing and supercomputing solutions, enterprise software, storage systems and microelectronics.This rally places STX among the top-performing names in the broader market, driven by industry-wide demand for data storage and supply constraints in the HDD market. Seagate’s dominant position in high-capacity HDDs makes it one of the primary beneficiaries of AI and data-center expansion, a trend likely to continue through the latter half of this decade. Let’s explore the key drivers, potential headwinds and what investors might expect in 2026 and beyond.What’s Triggering STX’s Rally?The fundamental driver behind Seagate’s rally is surging demand for storage capacity, fueled by megatrends such as AI and cloud computing, tight supply dynamics and mass-capacity drives preferred for bulk storage. It is benefiting from strong global cloud demand and rapid growth in high-capacity HAMR drive adoption, with cloud demand and improving enterprise OEM trends expected to continue.Demand for high-capacity HAMR drives is increasing as customers seek efficient solutions for AI-driven data growth. Its HAMR-based Mozaic 3+ platform enables denser storage and is gaining strong traction, with five global CSPs qualified on 36TB offerings. Production is progressing smoothly, with HAMR drives expected to reach a 50% exabyte share by the second half of 2026. Seagate is also developing Mozaic 4+ drives with capacities up to 44TB, aiming for volume ramp-up in early 2026, while moving toward 5TB-per-disk technology for launch around 2028.As AI shifts from training to large-scale inferencing, requirements for checkpointing and massive data retention are driving rapid growth in high-capacity storage demand. Amid tight supply, Seagate is working closely with data center customers to speed up qualification of its high-capacity HAMR-based Mozaic drives, with most major cloud providers already qualified and production ramping to meet strong demand. Robust data center growth offset sequential softness in Edge IoT, with seasonal improvement expected in the December quarter. Long-term customer agreements provide strong demand visibility into 2027.Seagate’s Lyve Cloud expansion strategy is another tailwind. Lyve Cloud is the company’s storage-as-a-service platform (only S3-compatible) intended primarily to help business organizations manage exponential unstructured data growth. In September 2025, Seagate partnered with Acronis to offer Acronis Archival Storage, a secure, compliant, cost-efficient S3 solution using its Lyve Cloud. Designed for MSPs and regulated sectors, it provides long-term data storage with enterprise-grade security, predictable costs and full compliance support.STX’s Solid Financials Back the RallyOn its last earnings call, management raised its quarterly dividend by about 3% to 74 cents per share, signaling confidence in cash-flow sustainability as it benefits from HAMR leadership and a strengthening high-capacity storage demand backdrop. During the quarter, Seagate returned capital to shareholders through a mix of dividends and share repurchases. The company paid $153 million in dividends and repurchased 153,000 shares for approximately $29 million. It anticipates stronger free cash flow generation in the December quarter.Image Source: Zacks Investment ResearchSeagate's business model changes and strong product pipeline position it well for better profitability and cash flow in fiscal 2026. Since the first quarter of fiscal 2026, it has streamlined its operations around two core markets — Data Center, serving cloud, enterprise and VIA customers with nearline drives and systems, and Edge IoT, which includes consumer and client segments, such as network-attached storage.Even with a strong bull case, there are noteworthy headwinds that investors should be aware of. Seagate remains exposed to several risks, such as forex fluctuations, stiff competition across the storage landscape and ongoing macro and supply-chain challenges. The company’s sizable debt burden further constrains financial flexibility for dividends, buybacks and acquisitions, potentially pressuring future performance. However, management expects net leverage to trend lower as earnings strengthen and is exploring additional measures to reduce debt and support balance-sheet improvement.For the fiscal second quarter, it expects revenues to be $2.7 billion (+/- $100 million), up 16% year-over-year at midpoint. At the midpoint of revenue guidance, non-GAAP operating margin is projected to increase to approximately 30%. For fiscal 2026, STX expects capital spending to remain within its targeted 4-6% of revenue range while maintaining strict capital discipline.Estimate Revision Trend for STXSTX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2026 have increased 2.2% to $11.26 over the past 60 days, while the same for fiscal 2027 has gone up 5.2% to $14.88.Image Source: Zacks Investment ResearchKey Valuation Metric of STXGoing by the price/earnings ratio, the company’s shares currently trade at 24.26 forward earnings compared with 17.73 for the industry.Image Source: Zacks Investment ResearchInvestors ActionThe combination of strong demand amid constrained supply has helped Seagate expand margins, beat earnings estimates and generate robust free cash flow, factors that tend to attract investors and support higher valuations. Management emphasized that its Mozaic HAMR HDD products are now qualified with several major cloud customers, indicating strong customer receptivity to its high-density drives, a key catalyst for future growth.A strong enterprise storage roadmap further positions Seagate to deliver customer value and long-term shareholder returns. Flaunting a Zacks Rank #1 (Strong Buy) at present, STX seems to be a good bet for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They includeStock #1: A Disruptive Force with Notable Growth and ResilienceStock #2: Bullish Signs Signaling to Buy the DipStock #3: One of the Most Compelling Investments in the MarketStock #4: Leader In a Red-Hot Industry Poised for GrowthStock #5: Modern Omni-Channel Platform Coiled to SpringMost of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.Download Atomic Opportunity: Nuclear Energy's Comeback free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report International Business Machines Corporation (IBM): Free Stock Analysis Report Western Digital Corporation (WDC): Free Stock Analysis Report Seagate Technology Holdings PLC (STX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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