Why Seagate (STX) Stock Is Rallying Today

Hard disk drive maker Seagate Technology (STX) is advancing 8% after the firm reported stronger-than-expected fiscal second-quarter results after the market closed yesterday.

A Look at STX’s Q2 Results

The company generated earnings per share, excluding certain items, of $2.03, way above analysts’ average estimate of $1.88. The company reported revenue of $2.33 billion, slightly above the mean estimate of $2.32 billion.

A data center filled with racks of hard disk drives and solid state drives.

The midpoint of STX’s fiscal Q3 EPS guidance range came in at $1.70, exactly in-line with analysts’ average outlook.

“Our results demonstrate structural improvements in the business and our focus on value capture in an improving demand environment”, CEO Dave Mosley said in a statement.

Morgan Stanley Chooses STX as a Top Pick

Heading into the tech firm’s results, Morgan Stanley elevated STX to top-pick status. The bank is now more confident that the favorable trends of the hard-disk drive sector will continue, and it expects STX’s sales to surge in its quarter that ends in June.

Additionally, Morgan Stanley wrote that other analysts were being too conservative about the outlook of STX’s gross margins. The bank expects Seagate to get a lift from “accelerating data growth” going forward, and it kept an Overweight rating on the name.

While we acknowledge the potential of STX, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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.

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Disclosure: None. This article is originally published at Insider Monkey.