Seagate Technology Holdings PLC

STX Details

Seagate Technology Holdings PLC (NASDAQ: STX) is a leading data storage technology and solutions provider and sells a wide range of data storage devices, including hard disc drives (HDDs), solid-state drives (SSDs), solid-state hybrid drives (SSHDs), storage subsystems, and an edge-to-cloud mass data platform. Its key clients include original equipment manufacturers (OEMs), distributors, and retailers. STX operates in the Asia Pacific, Americas, and EMEA (Europe, the Middle East, and Africa) regions.

Latest News:

• New Product Launches: STX launched the new Star Wars Beskar Ingot Drives family on October 26, 2021, its first release in a collab with Lucasfilm to provide designs inspired by the Star Wars saga to its range of PC gaming storage devices, which pushes the gamers' battle stations to the next level.
• Zoom Selects STX's Cloud Platform: The company announced a partnership with Zoom on August 31, 2021, under which Zoom's users would have access to the Seagate Lyve cloud platform to store meeting recordings.

Q1FY22 Results:

• Progress in Revenues: STX reported a 34.62% rise in revenue to USD 3.12 billion in Q1FY22 (ended October 01, 2020) compared to USD 2.31 billion in Q1FY21 (ended October 02, 2020), owing to increased demand for its mass capacity products
• Sharp Uptick in Bottomline: It witnessed a massive increase in net income to USD 526 million in Q1FY22 vs. USD 223 million in Q1FY21.
• Cash Dividend: On October 22, 2021, STX declared a quarterly dividend of USD 0.70 per share, payable on January 05, 2022, to shareholders of record on December 22, 2021.
• Share Repurchases and Dividends Paid: During Q1FY22, STX repurchased roughly 5 million of its ordinary shares for USD 425 million and distributed USD 153 million in dividends.

Key Risks:

• Supplier Concentration: Some components that STX does not produce, such as recording media substrates, read/write heads, ASICs, spindle motors, printed circuit boards, suspension assemblies, and NAND flash memory, are primarily sourced from a small number of direct and indirect vendors. As a result, the failure of a significant supplier to produce the components on schedule might harm the company's operating performance and cash flows.
• Global Trade Risks: STX generates a sizable amount of its revenue from sales outside the US. Accordingly, any disruptions in the economic, environmental, political, legal, or regulatory landscapes of the countries it operates in might have a materially adverse impact on its production and sales operations.

Outlook:

• Q2FY22 Revenue Estimate: STX announced on October 22, 2021, that it anticipates Q2FY22 revenue to be USD 3.1 billion (+/- USD 150 million).
• EPS Guidance: It anticipates its Q2FY22 non-GAAP diluted EPS to be USD 2.35 (+/- USD 0.15).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

STX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

STX's stock price has surged 8.22% in the past month and is currently trading at the slightly higher band of the 52-week range of USD 47.95 to USD 106.22. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 64.55. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 105.60.

Considering the company's growth prospects, solid margins, strategic partnerships, recently released products, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 91.35, down 0.60% as of November 02, 2021, 2:41 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV. 

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