Seagate’s 1Q Sales Miss; Analyst Raises PT

Seagate Technology shares declined over 2% on Friday after the data storage company’s 1Q sales declined 10.2% to $2.31 billion from the year-ago quarter and fell short of the consensus estimate of $2.34 billion. Its earnings of $0.93 per share declined 9.7% year-over-year but came ahead of the Street consensus of $0.88.

Seagate (STX) raised its quarterly cash dividend by 3% to $0.67 per share, which will be paid on Jan. 6, 2021 to shareholders of record as on Dec. 23, 2020. The company also approved an additional share repurchase authorization of $3 billion. Seagate now has an authorized share repurchase program worth $4.2 billion.

Seagate’s CEO Dave Mosley said “Seagate delivered solid September quarter results supported by strong recovery in the video and image applications market and healthy cloud data center demand, which drove double digit year-over-year revenue growth for our mass capacity storage solutions.”

Mosley added that “We see indications for Enterprise demand to improve and we expect this to continue as the broader markets gradually recover, supporting our positive December quarter outlook and reinforcing our revenue expectations for the fiscal year.” (See STX stock analysis on TipRanks).

Seagate foecasts 2Q EPS in the range of $0.95-$1.25, versus the consensus estimate of $1.08. The company also expects 2Q revenue in the range of $2.35-2.85 billion, compared to analysts’ expectations of $2.48 billion.

Following the results, Rosenblatt Securities analyst Kevin Cassidy raised his price target to $65 (28.1% upside potential) from $63 and maintained his Buy rating on the stock. The 5-star analyst said “We see the product roadmap as driving revenue growth and market share gains as the Enterprise demand picks up in CY21.” He further added that “as the supply chain and logistics return to more normal patterns, gross margin can recover.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 9 Holds, 7 Buys and 4 Sells. The average price target of $53.39 implies upside potential of about 5.2% to current levels. Shares have dropped by 14.7% year-to-date.