Seagate (NASDAQ: STX) recently released its Q2 earnings, and its stock has surged 25% year-to-date (Jan. 24), reaching nearly $108 per share. STX beat both on top and bottom lines in its fiscal second quarter, which ended December 27. The company reported net sales of $2.3 billion in Q2’25 (ended December), up 50% year-over-year (y-o-y) due to a rebound in storage demand. The company’s gross margin grew from 23.3% in Q2 2024 to 34.9% in Q2 2025. Its operating margin also expanded from 8.0% in the prior year quarter to 21.0% in Q2’25. The company’s EPS surged to $1.55 from $(0.09) over the same period.
Seagate stock has seen a 30% rise in value since early January 2024 compared to an increase of about 28% for the S&P 500 over this period. Similarly, its peer – Western Digital stock (NASDAQ: WDC) – also grew 29% over this period. Both companies are seeing a recovery in storage demand, amid the AI boom. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Seagate is shifting its focus to Heat Assisted Magnetic Recording technology, which offers longer-lasting storage solutions compared to traditional disks. The company has already begun shipping 30 TB hard disks utilizing HAMR, positioning itself for growth as demand for these innovative products increases. The rising need for data storage, driven by AI applications, is expected to drive demand for Seagate’s high-capacity drives. Additionally, the company has seen significant improvements in profitability, with operating margins rising to 20% in the first half of fiscal 2025, up from 7% in FY ’24. Looking ahead, Seagate’s operating margins are expected to continue improving.
We estimate Seagate’s Valuation to be $115 per share, reflecting around 6% upside from current levels of around $108. Our forecast of $118 is based on a 15.5x price-to-earnings multiple and adjusted earnings of $7.43 per share in FY 2025. We think a rise in valuation multiple now makes sense, given the rebound in demand and strong expected earnings growth in the coming years, driven by AI and mass-capacity storage solutions demand. Notably, the average analyst price estimate of $123 for STX also reflects a nearly 13% upside, implying that the stock has more room for growth. We expect Seagate’s revenue to grow 40% y-o-y to $9.2 billion in 2025.
Investors have rewarded STX stock, thanks to its storage product sales rebound and the recent expansion of profit margins. However, the increase in STX stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 88% in 2021, -51% in 2022, 69% in 2023, and 4% in 2024. The Trefis High Quality Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
While STX stock looks like it may see higher levels, it is helpful to see how Seagate’s peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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