Seagate Inventory Skyrockets 80% in 2025. Right here’s Why STX May Nonetheless Be a Steal

Seagate Know-how (STX) has been one of many top-performing S&P 500 Index ($SPX) shares of 2025. It has soared over 80% year-to-date. This vital rally is supported by the stable demand for the corporate’s merchandise, elevated investments in synthetic intelligence (AI) infrastructure, its enhancing leverage profile, and improved profitability.

Seagate is seeing surging demand for its mass-capacity storage merchandise. As cloud computing expands and knowledge facilities scale as much as help AI purposes, the demand for high-capacity laborious drives continues to soar. Seagate is well-positioned to capitalize on this chance. Its merchandise have change into important for hyperscale cloud suppliers and enterprises alike, making it a pure beneficiary of the AI-driven knowledge explosion.

The corporate’s financials mirror the stable demand tendencies. Seagate just lately closed fiscal 2025 on a stable notice. Income surged 39% in fiscal 2025, adjusted gross revenue practically doubled, and working revenue greater than tripled. This stable efficiency is pushed by its supply-demand alignment, tight price controls, and a concentrate on high-value merchandise.

Quarterly efficiency has been simply as spectacular. In the newest fiscal fourth quarter, income jumped 30% year-over-year, whereas adjusted gross margin expanded 170 foundation factors sequentially. This sustained enchancment displays the corporate’s shift towards a build-to-order (BTO) manufacturing mannequin, provide self-discipline, and dynamic pricing methods, all of which have helped the corporate preserve profitability even in aggressive markets.

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Seagate is in a stable progress part, with no indicators of dropping momentum. It continues to see robust demand for its merchandise, a development that’s anticipated to drive each its financials and share value larger. Administration is optimistic about margin growth, due to the accelerating adoption of its next-generation Warmth-Assisted Magnetic Recording (HAMR)–based mostly Mozaic drives.

Trying forward, mass capability storage stays a key progress driver. Seagate is ramping manufacturing of its HAMR-based Mozaic merchandise and gaining traction with prospects at a formidable tempo. Three main cloud service suppliers have already certified these drives, with extra prospects transferring by the qualification course of easily. Demand from cloud suppliers is surging, and even the enterprise OEM market is displaying indicators of life, with nearline gross sales posting modest sequential good points. Administration expects this demand to carry regular within the months forward.

The corporate’s BTO technique offers visibility into stable future gross sales and margins, strengthening confidence in ongoing demand for its high-capacity nearline drives.

Seagate can also be navigating international challenges nicely. By diversifying its manufacturing footprint and provide chains, Seagate is mitigating dangers from evolving commerce insurance policies and tariffs, minimizing any potential affect on operations or outcomes.

Financially, Seagate can also be making significant progress in fortifying its steadiness sheet. As of the top of June, the corporate had lowered its debt to $5 billion. Sturdy profitability mixed with decrease debt has introduced its web leverage ratio all the way down to 1.8 occasions. With revenue growth anticipated within the coming quarter, additional enchancment in leverage is on the horizon.

Seagate inventory has appreciated considerably to date this yr. Nonetheless, it presents vital worth close to the present value ranges. The corporate is poised to learn from the robust long-term demand for mass knowledge storage, pushed by cloud suppliers and edge IoT prospects ramping up investments in AI-powered initiatives.

Regardless of these tailwinds, STX shares stay comparatively cheap. At the moment, Seagate is buying and selling at a ahead price-earnings ratio of simply 16.8x. The inventory seems too low-cost to disregard, contemplating its progress prospects. Analysts venture earnings per share (EPS) to leap by 24.1% in fiscal 2026 and one other 29.4% in 2027, suggesting that the market could not but be absolutely pricing in Seagate’s potential.

Seagate’s outstanding surge in 2025 has saved analysts cautiously optimistic about its prospects. Nonetheless, robust demand for its high-capacity storage merchandise, rising traction for HAMR-based Mozaic drives, a more healthy steadiness sheet, and low valuation may preserve Seagate’s momentum going.

On the date of publication, Amit Singh didn’t have (both immediately or not directly) positions in any of the securities talked about on this article. All data and knowledge on this article is solely for informational functions. This text was initially printed on Barchart.com