Seagate Technology slipped Wednesday on a fiscal fourth-quarter earnings report that beat estimates but came with slightly lower-than-forecast guidance for the current quarter. Analysts rallied to the defense of Seagate stock, which was ahead more than 70% this year coming into its late Tuesday earnings report.
The Fremont, Calif.-based Seagate said that it earned an adjusted $2.59 per share for the June-ended quarter, up 146% from a year earlier. That topped the $2.45 per share that analysts polled by FactSet were forecasting. Sales increased 29.5% to $2.44 billion, compared to analyst estimates of $2.42 billion.
For the current quarter, Seagate guided for sales of $2.5 billion. Analysts had projected $2.53 billion in sales for the September-ending period, according to FactSet.
On the stock market today, Seagate stock is fell 3.5% to close at 147.42.
"Seagate's strong (fiscal Q4) performance underscores our commitment to profitable growth, marked by a 30% year-over-year revenue increase, record gross margin, and non-GAAP EPS expanding to the top of our guidance range," Seagate Chief Executive Dave Mosley said in a news release. "These achievements reflect the structural enhancements we've implemented in our business and ongoing demand strength from cloud customers for our high-capacity drives."
Wall Street Bulls Defend Seagate Results
Seagate is the world's largest manufacturer of the hard-disk drives used in both personal computer and enterprise data centers. Shares have gained 73% this year and 53% compared to 12 months ago.
The gains for Seagate started with strong fiscal Q3 results published in late April. After a down period, analysts are anticipating that AI-powered demand from data centers and a refresh cycle for laptops will drive strong hard-disk drive demand. Seagate rival Western Digital has also rallied this year, up by nearly 60%.
Analysts are positive about Seagate's Heat-Assisted Magnetic Recording, or HAMR, technology in hard drives, which could help Seagate provide the growing capacity needs of AI data centers.
Despite the negative stock reaction, analysts saw much to like in Seagate's results.
Wedbush Securities analyst Matt Bryson reiterated an outperform call and 175 price target for Seagate stock in a client note Wednesday.
"We believe the stock is down modestly given high expectations heading into the quarter," Bryson wrote. "But with margin and revenue momentum seemingly continuing into (the current quarter) — particularly if we are correct and STX again guided conservatively — and with HAMR progress continuing, we see no reason to shift our constructive view on the name."
Morgan Stanley analyst Erik Woodring also pinned Wednesday's decline for Seagate stock on high expectations. He said the report still indicated that a "favorable hard-disk drive supply/demand landscape is persisting."
Seagate Stock: Technical Ratings
With Wednesday's slide, Seagate stock slipped below its 21-day moving average but found support above its 50-day line.
Meanwhile, Seagate stock has an IBD Composite Rating of 97 out of a best-possible 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating.
