Seagate Earnings Due: Analyst Names Data Storage Firm Top Hardware Pick, Ahead of Apple

As Seagate Technology (STX) prepares to release its fiscal second quarter earnings today, one analyst has named the data storage firm as the top hardware pick, surpassing even tech giant Apple (AAPL). Morgan Stanley analyst Erik Woodring took a "contrarian view" in elevating Seagate to the top spot, citing several factors that suggest the company is well-positioned for growth.



One of the key factors driving Woodring's bullish outlook is the persistence of the HDD (hard-disk drive) cycle, which, combined with transitory near-term supply issues, can create a June quarter revenue snapback for Seagate. Additionally, Morgan Stanley believes that Wall Street estimates for Seagate's gross margin are too conservative, indicating that the company's profitability may be underestimated. These factors, along with accelerating data growth, which drives storage demand in the cloud and on-premise, contribute to Seagate's long-term growth prospects.



Seagate's recent performance and earnings guidance align with the analyst's bullish outlook. The company has rallied 17% in January after falling 15% in December, and its stock has reclaimed its long-term 200-day moving average. Analysts polled by FactSet are projecting Seagate's adjusted earnings to surge to $1.88 per share, compared to 12 cents per share for the same quarter in 2023, with sales projected to increase 49% to $2.32 billion.



Despite a late slump in 2024, Seagate's stock has rallied, contributing to a rebound after a deep slump in 2022 and the first half of 2023. The company's recent announcement of 36TB hard drives using HAMR-based Mozaic 3+ technology further demonstrates its commitment to innovation and meeting the massive storage needs of modern data centers. This, combined with the company's strong execution on its mass capacity product roadmap and positive free cash flow generation, supports the analyst's optimism about Seagate's prospects.



In conclusion, Seagate Technology's recent performance, earnings guidance, and innovative products position the company as a strong contender in the data storage market. With analysts projecting significant earnings growth and the company's commitment to meeting the increasing demand for mass capacity storage, Seagate is well-positioned to capitalize on the growing market driven by cloud growth and AI adoption. As Seagate prepares to release its fiscal second quarter earnings, investors should closely monitor the company's performance and consider the analyst's bullish outlook as a potential catalyst for further growth.