Seagate Beats Q4 Estimates; Shares Drop 3.4%

Seagate Technology Holdings plc (STX) reported stronger-than-expected fiscal Q4 results, topping both earnings and revenue estimates. Despite the upbeat results, shares of the data storage company declined 3.4% on July 21 to close at $82.60.

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The company reported adjusted earnings of $2.07 per share, beating analysts’ expectations of $1.84 per share. Revenues of $3.01 billion exceeded the consensus estimate of $2.95 billion.

Meanwhile, revenue from mass capacity storage markets jumped 29% on a year-over-year basis. The company reported earnings of $0.64 per share in the prior-year period.

Furthermore, operating margins of 16.8% grew 620 basis points versus 10.6% reported in the same period last year. (See STX stock charts on TipRanks)

Looking forward, the company provided guidance for the fiscal first quarter of 2022. The company forecasts adjusted earnings in the range of $2.05 to $2.35 per share, while revenues are forecast to be in the range of $2.95 to $3.25 billion.

Seagate’s CEO Dave Mosley commented, “Seagate delivered very strong June quarter results achieving the highest revenue in the last 6 years and the highest non-GAAP EPS in 9 years, which capped a fiscal 2021 in which we outperformed our expectations.”

He further added, “Demand for data is rapidly accelerating in the cloud and at the edge, driving secular growth for mass capacity data storage. Seagate’s industry-leading product portfolio for mass data infrastructure places the company in an outstanding position to capitalize on robust demand trends, generate solid and increasing free cash flow and achieve our long-term financial objectives.”

Following the results announcement, Summit Redstone analyst Kinngai Chan downgraded Seagate to Hold from Buy.

Chan said, “We expect the demand for large-cap HDDs to improve as cloud investment cycle returns driven by new server CPU launches. We expect the decline in HDD TAM to moderate as most PC Notebooks have transitioned to SSD.”

However, he foresees risk in the Chia crypto market, and further added, “we believe demand from the Chia crypto market will decline as the Chia coin price declines further.”

Consensus among analysts is a Moderate Buy based on 8 Buys and 9 Holds. The average Seagate Tech price target of $102.56 implies 24.2% upside potential to current levels.

STX scores a 7 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market expectations.