Woodring expects the company’s long-term gross margin guidance to match or exceed rival Western Digital’s 38%+ guidance.
Seagate Technology Holdings, Inc. (STX) could be on investors’ radar in the coming sessions as the data storage company prepares to host its analyst event on May 22.
In a note released on Thursday, Morgan Stanley's Erik Woodring said expectations are high, going into the event. The analyst views the event as a positive catalyst for the stock.
The analyst's industry checks point to a still-healthy hard disk drive cycle. Therefore, he expects the company to paint a positive picture and issue an outlook for a high-single-digit to mid-single-digit long-term revenue compounded annual growth rate.
Woodring expects the company’s long-term gross margin guidance to match or exceed rival Western Digital’s (WDC) 38% guidance. That implies stronger like-for-like long-term HDD margins due to technology leadership.
According to the analyst, the three focus areas of the analyst event are:
- A second cloud service provider qualification for Heat-Assisted Magnetic Recording (HAMR) — a hard drive technology that increases storage capacity by using heat to assist in writing data
- Details on how HAMR capacity ramps
- A new three to five- model that could imply about $14 of peak earnings per share (EPS), suggesting a stock trading at just 7.5 times peak EPS
The analyst said he would wait for the analyst event before tinkering with the price target but raised his bull-case valuation from $135 to $154, factoring in upside potential stemming from $14 of peak EPS.
On Stocktwits, Seagate stock elicited ‘neutral’ sentiment (51/100) from retailers early Friday, with the message volume at ‘low’ levels.
Seagate stock traded up 0.34 % at $107.80 in Friday’s early premarket session, while it has gained over 25% year-to-date.
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