On Thursday, Evercore ISI expressed a positive outlook for Seagate Technology (NASDAQ:STX) and Western Digital (NASDAQ:WDC) stocks, two major players in the data storage industry.
According to the firm, both companies are expected to experience near-term upside, with Western Digital potentially seeing a greater benefit due to favorable pricing dynamics in the NAND market compared to traditional hard disk drives (HDD).
The firm highlighted that Western Digital is likely to benefit more significantly owing to the pricing advantages in the NAND sector.
Additionally, Western Digital is reportedly making gains in the HDD market as a result of delays in the development of Heat-Assisted Magnetic Recording (HAMR) technology by competitors. These gains are seen as a positive development for the company's market share.
For Seagate Technology, the focus is on the progress of HAMR technology qualifications. Evercore ISI noted that minor delays of approximately four to six weeks in the HAMR schedule are not expected to significantly alter the market's perception of Seagate, provided the company stays on track to reach its target of one million units by the end of the year.
The analyst's comments suggest confidence in the potential growth of both Seagate and Western Digital. The mention of "minor issues" causing a short delay in Seagate's HAMR technology rollout was downplayed, with the assertion that as long as the year-end goal is met, the overall narrative around the company's progress should remain unchanged.
InvestingPro Insights
Seagate Technology (NASDAQ:STX) presents a mixed picture according to recent InvestingPro data. While analysts expect a decline in sales in the current year, Seagate remains a prominent player in the Technology Hardware, Storage & Peripherals industry. Despite concerns about profitability, as the company was not profitable over the last twelve months, there is an anticipation of profitability this year. Moreover, Seagate has a track record of maintaining dividend payments, with a consistent payout for 14 consecutive years, currently offering a dividend yield of 3.33% as of March 2024.
InvestingPro data highlights a significant price uptick over the last six months, with a 25.0% total return, and a strong return over the last five years, at 36.1%. However, the company is trading at a high EBITDA valuation multiple, with the market cap adjusted to 17.64B USD, and a negative P/E ratio of -24.20, which reflects the challenges faced in the recent quarters. With a gross profit margin of 18.65% in the last twelve months as of Q2 2024, it underscores the weak gross profit margins that analysts have pointed out.
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