What's Next For Seagate Stock?
MINNEAPOLIS, MN - JANUARY 03: A general view of the Seagate Technology company offices on January ... More 03, 2024 in Minneapolis, Minnesota. (Photo by AaronP/Bauer-Griffin/GC Images)
Note: STX's fiscal year concludes in June
Seagate (NASDAQ: STX) has achieved an impressive 60% year‑to‑date increase, significantly exceeding the S&P 500's 4% rise. This upswing owes to structural improvements within the business, alongside robust market dynamics and focused execution in advanced technologies such as HAMR (Heat Assisted Magnetic Recording). The company is capitalizing on a resurgence in the data‑storage market, benefiting from elevated demand fueled by generative AI.
Reflecting back to FY 2022, STX's value has more than doubled, supported by:
We will explore these factors in greater detail. While STX stock has provided substantial returns, those in search of growth with reduced volatility compared to individual stocks might consider the High Quality portfolio, which has surpassed the S&P 500 with returns exceeding 91% since its inception. Separately, see – BigBear.ai: What's Happening With BBAI Stock?
What's Behind The Revenue Performance?
Seagate's revenue plummeted dramatically from $11.66 billion in FY 2022 to $6.55 billion in FY 2024—a 44% decline—largely due to weak demand in consumer PCs and external HDDs, Covid-related disruptions in Asia, component shortages, and persistent inflationary pressures. However, in the first nine months of FY 2025, revenue skyrocketed 42% year-over-year to $6.7 billion, propelled by strong demand from data-center and cloud customers. The explosive growth in AI applications is increasingly driving the desire for high-capacity drives.
In spite of SSDs capturing market share due to speed and efficiency, their higher cost per terabyte continues to make HDDs indispensable for large-scale storage. Seagate has wisely focused on enterprise-grade, high-capacity HDDs while reducing its production of lower-capacity consumer drives and limiting SSD exposure. Instead of vertically integrating NAND, it procures from partners like Kioxia, allowing for a streamlined focus on cost-effective bulk storage solutions. This tactic has led to steady, sustainable growth in Seagate's key markets.
What's Contributing To The Higher Valuation For STX Stock?
Seagate stock has seen a substantial rise in valuation multiples, with its price-to-sales (P/S) ratio increasing from 1.2x in FY 2022 to 3.2x today. Currently trading at approximately $136, STX stock's trailing P/S multiple of 3.2x exceeds its four-year average of 2.2x and is also notably higher than Western Digital's (NASDAQ: WDC) historical average (1.15x). Several critical factors are propelling this continuous growth:
Yet, There Are Risks
Despite the optimistic outlook, there are significant risks. In periods of market downturn, STX has consistently lagged behind the S&P 500—declining 58.2% during the inflation-induced selloff in 2022 (from $116.02 on Jan 4 to $48.49 on Nov 3, as opposed to a 25.4% S&P decline), but it fully recovered by May 27, 2025, and surged to $136.31 by June 24. During the COVID crash, STX fell 35.6% compared to a 33.9% decrease in the S&P. In the 2008 financial crisis, the stock plummeted 89.1% while the S&P dropped 56.8%.
Although Seagate benefits from AI/cloud-driven storage needs, it continues to confront risks, including technological shifts, capacity constraints, regulatory or supply chain challenges, pricing pressures, and reputational issues. Investor confidence is presently reflected in premium multiples (3x P/S), but with minimal cushion, a downturn could have a significant impact, particularly in contrast to competitors like WDC, which trades closer to 1x in challenging times.
Investing in a singular stock carries inherent risks. We utilize a risk assessment framework when constructing the 30-stock Trefis High Quality (HQ) Portfolio, which has a proven history of comfortably outperforming the S&P 500 over the past 4 years. Why is this the case? As a collective, HQ Portfolio stocks have yielded superior returns with reduced risks compared to the benchmark index; providing a smoother ride, as highlighted in HQ Portfolio performance metrics.
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