Seagate stock down as below-consensus Q2 guidance offsets Q1 beat

Investing.com -- Seagate Technology PLC (NASDAQ:STX) shares slid 5% in premarket trading Wednesday after the data storage company issued a Q2 guidance that fell short of analyst estimates.

For the fiscal Q1 that ended on Sept. 27, Seagate reported adjusted earnings per share (EPS) of $1.58, topping the consensus estimates of $1.48. Revenue came in at $2.17 billion, also above the estimated $2.13 billion.

"Seagate is off to an outstanding start to the fiscal year, highlighted by gross margin expanding to the highest level in more than a decade," said Dave Mosley, Seagate’s CEO.

"We executed on our plans to aggressively ramp our 28-terabyte nearline drives and broaden the number of cloud customers entering qualification on HAMR-based Mozaic products,” he added.

Looking ahead, the company forecasts adjusted earnings of $1.85 per share, with a 20-cent margin of error, below the consensus estimate of $1.87.

Revenue is expected to be around $2.30 billion, plus or minus $150 million, slightly below the estimated $2.35 billion.

In the wake of the report, Mizuho analysts reiterated an Outperform rating on STX shares and raised their price target to $130 from $125.

They also hiked their Seagate estimates “as we see STX positioned well into the upcycle with HAMR ramping as mass capacity demand remains strong.”

Separately, Baird analysts said:

“HAMR is now at the early stage of volume shipments, with cloud qualifications ahead, and represents an additional gross margin catalyst. Free cash flow (FCF) are expected to continue improving throughout the year.”

Seagate’s Board of Directors declared a quarterly cash dividend of $0.72 per share, payable on January 6, 2025, to shareholders on record as of December 15, 2024.