The growing demand for solid-state drives—indeed, computer hardware of all types—has left Seagate (STX) in an excellent position. It’s recently expanded a partnership to help broaden its range of options and better meet that demand. Working to meet market demand is a positive trait in a company. That leaves me moderately bullish on a company that works in such a direction.
The last 12 months for Seagate have been plenty volatile. New peaks arrived in April, May, and November 2021, only to prove short-lived. Similar peaks in January and February 2022 met similar fates, but the company is still close to where it was this time last year.
As for the latest news, Seagate is stepping up its partnership arrangement with Phison to augment its solid-state drives. Specifically, the duo will augment their line of enterprise-grade NVMe drives.
Improvements therein will help offer reduced ownership costs. Power expenses to run the drives will reduce. Storage density will improve, and so too will overall performance.
Wall Street’s Take
Turning to Wall Street, STX has a Moderate Buy consensus rating. That’s based on 11 Buys and nine Holds assigned in the past three months. The average Seagate price target of $112.26 implies 30.9% upside potential.
Analyst price targets range from a low of $93 per share to a high of $130 per share.
Funds, Insiders Cutting Back Despite Solid Dividend Performance
While things are looking pretty sound at Seagate, the word from hedge funds and insiders seems to be less convinced. The TipRanks 13-F Tracker revealed that hedge funds lowered their holdings by around 1.9 million shares back in the last quarter. Given that holdings are still well over 15.5 million total shares, this isn’t that big a drop.
Meanwhile, insiders also seem a bit concerned about the value of their holdings therein; insiders sold a combined total of $227.1 million in Seagate shares over the last three months.
These points are somewhat strange given Seagate’s dividend history. Income investors will be happy to note that the dividend has regularly increased since 2019. The increases may be incremental, but they’re regular, and payouts are routine as well.
Multiple Pathways to Success at Seagate
It’s almost surprising that Seagate’s not doing better than it is. It’s trading well under its price targets; even the lowest price target is looking downright aspirational to Seagate’s numbers right now. The average price target was on par with its highs seen back in January. This means the upside potential is both there and achievable.
Making a bigger push into enterprise-grade solid-state drives is a good play. Those drives will prove useful for everything from data centers to artificial intelligence, both widely-realized growth areas.
Fortune Business Insights revealed that the artificial intelligence market alone was valued at $328.34 billion in 2021 alone. It’s projected to hit $1.39 trillion by 2029. Meanwhile, a ResearchAndMarkets report put just the data center power market to grow at a compound annual growth rate (CAGR) of 6.58% until 2027.
That’s going to give Seagate a percentage of some very major growth markets going forward. However, these aren’t the only markets Seagate will be in on. Seagate’s Lyve edge-to-cloud mass storage platform got a boost from new involvement with Atempo’s Miria. Seagate also rolled out a 10-platter video surveillance disk drive that boasts 20 terabytes of storage.
Best of all, Seagate also showed that the hard drive isn’t dead yet. Moreover, it’s still bringing massive storage performance to the table. Its latest drives suggest that there will be a commercially-available 50 terabyte drive by 2026.
Take all of these factors together, and Seagate is more than just enterprise-grade solid-state drives. Seagate will be part of multiple markets. From regular consumers’ home theater media storage to the very latest in artificial intelligence, Seagate will be there.
That’s an impressive level of diversification and one that should provide an effective pathway to future growth. As more applications for data storage come around, Seagate’s level of demand for storage should likewise grow.
Competitors in the market like Western Digital (WDC) and the like will make things tougher for Seagate. However, Seagate will have at least some of that business for itself, even in the worst case.
Back in 2012, the Library of Congress represented about 15 terabytes of data. We are to the point where we are actively storing multiple 2012 Libraries of Congress on a single drive. Seagate is actively moving to be part of this growing trend toward digital storage. That should make investors a worthwhile proposition going forward.
The company’s fundamentals are sound. It’s trading at a level that should make investors enthusiastic. Best of all, it looks to be laying solid groundwork for performance going forward.
Certainly, the company will have its hands full fending off competitors in the field. However, it’s also got quite a few worthwhile irons in the fire. As long as artificial intelligence and data storage needs are on the rise, so too should Seagate. That’s enough reason to be bullish.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.