We came across a bullish thesis on Seagate Technology Holdings plc (STX) on Value Investing Subreddit Page by fortitudelkw. In this article, we will summarize the bulls’ thesis on STX. Seagate Technology Holdings plc (STX)’s share was trading at $108.18 as of Jan 22nd. STX’s trailing and forward P/E were 19.67 and 14.95 respectively according to Yahoo Finance.
Seagate Technology (STX) stands out as a major beneficiary of the rapidly growing cloud storage market, driven by the explosion of AI adoption and the resulting surge in data creation. With a robust technological edge and strategic positioning, Seagate is poised to capitalize on this transformative trend, making it a compelling investment opportunity.
The rise of AI, IoT, and Generative AI has led to an unprecedented demand for storage solutions, with 61% of cloud users expecting their storage needs to more than double by 2028, according to a recent survey commissioned by Seagate. Notably, 89% of the data stored by top cloud service providers relies on hard drives (HDDs), positioning Seagate as a critical enabler in the cloud ecosystem. In response, the company is scaling its production of high-capacity hard drives powered by its groundbreaking HAMR (Heat-Assisted Magnetic Recording) technology. This innovation doubles storage capacity per platter, offering unmatched value to cloud providers managing ever-expanding datasets. Seagate has already qualified HAMR technology with key clients and plans to expand its customer base by mid-2025, solidifying its competitive advantage in a storage-dependent world.
Financially, Seagate has demonstrated resilience and growth, consistently improving profitability through operational efficiency and the adoption of HAMR technology. This has translated into higher gross margins and earnings that have exceeded expectations, prompting analysts to revise their price targets upward. For instance, Morgan Stanley raised its target from $129 to $134, Mizuho increased its outlook from $107 to $115, and Citi adjusted its forecast from $120 to $125. These upward revisions underscore the market’s recognition of Seagate’s strong financial position and growth potential.
The cloud storage market’s expansion aligns directly with Seagate’s growth trajectory. As AI technologies mature, companies are storing more data for longer periods to refine AI accuracy, sustaining demand for high-capacity storage solutions. Seagate’s strategic focus on innovation and its established presence in the cloud market ensure that it remains at the forefront of this booming sector.
With its cutting-edge technology, strong customer relationships, and improving financial metrics, Seagate is exceptionally well-positioned to thrive in the AI-driven cloud storage boom. For long-term investors, the company offers a unique opportunity to benefit from the sustained growth of AI and cloud adoption, with significant upside potential as the demand for data storage continues to accelerate.
Seagate Technology Holdings plc (STX) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held STX at the end of the third quarter which was 44 in the previous quarter. While we acknowledge the risk and potential of STX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.