What Happened?
Shares of data storage manufacturer Seagate (NASDAQ: STX) jumped 7% in the afternoon session after Morgan Stanley significantly raised its price target on the shares, pointing to strong earnings and high demand from artificial intelligence (AI) data centers.
The bank boosted its price target to $1,035 from $767 and maintained an "overweight" rating on the stock. This view was supported by Seagate's strong quarterly results, which beat estimates, and its robust guidance for the next quarter.
Fueling the optimism is high demand from cloud providers and for AI infrastructure, with reports suggesting Seagate's nearline storage capacity is largely allocated through 2027. The stock's advance was also part of a wider rally in the memory and storage sector, which gained after a U.S.-Iran peace agreement increased investor risk appetite in global markets.
The shares closed the day at $1,019, up 9.5% from the previous close.
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What Is The Market Telling Us
Seagate’s shares are extremely volatile and have had 49 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 6.6% on the news that it announced plans to redeem all outstanding 3.50% Exchangeable Senior Notes due 2028, a move that will strengthen its financial position.
The redemption is expected to eliminate approximately $150.7 million of debt, improving the company's capital structure and financial flexibility. This followed a period of positive investor sentiment.
On a recent earnings call, Seagate's management raised its annual revenue growth forecast to at least 20%, driven by the high demand for data storage from the artificial intelligence industry. The company's confidence stems from its disclosure that its nearline capacity is almost fully allocated through calendar 2027, providing strong visibility into future revenue.
Seagate is up 254% since the beginning of the year, and at $1,017 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Seagate’s shares 5 years ago would now be looking at an investment worth $10,829.
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