Analysts are ratcheting up their worth targets on shares of
after the corporate increased its guidance, pushed by a mix of sturdy enterprise and cloud demand for top capability drives and the frenzy of drive purchases by cryptocurrency farmers.
For the quarter ended June 30, Seagate (ticker: STX) stated on Tuesday that it now sees income of $2.95 billion, give or take $150 million, up from a earlier forecast of $2.85 billion, with non-GAAP income of $1.85 a share, give or take 15 cents, up from $1.60.
“Strong, broad-based demand for our merchandise into the mass capability markets and distribution channel is driving upside to our fourth quarter outlook,” Seagate CEO
stated. “We are excited by the optimistic momentum we’re seeing globally and leveraging the agility of our manufacturing operations to tackle the quickly altering demand setting.”
The pre-announcement yesterday got here forward of an look by Seagate CFO Gianluca Romano at a digital
Bank of America
know-how convention. Romano, too, highlighted “broad-based sturdy demand” for onerous drives, new demand from the crypto house, and bettering gross margins on the occasion, BofA Global Research analyst
wrote in a analysis word concerning the occasion. The analyst added that the corporate is seeing sturdy demand from each cloud and enterprise clients, and from crypto and surveillance functions.
The sturdy demand within the crypto house has been attributed to farming Chia, a brand new digital forex that makes use of storage as an alternative of computational energy to mine the asset.
Chia makes use of a unique mannequin than different cryptocurrencies to create new cash. Most cyrptocurrencies depend on a “proof of labor” mannequin to confirm transactions: Miners resolve complicated mathematical issues that require numerous computational energy to earn cash, which explains why conventional crypto mining is so power intensive. Chia’s strategy to creating new cash is tied to storage capability dedicated to the blockchain, fairly than computational may. What Chia does require is huge disk-drive capability. (Chia calls the method farming, fairly than mining.)
Mohan thinks the corporate may exit calendar-year 2021 at an earnings run charge as excessive as $10 a share, with the consensus nearer to $7.50. Mohan repeated his Buy score on Seagate shares, and lifted his worth goal to $135, from $120.
Seagate shares have been up fractionally on Wednesday at $100.99. Earlier within the day the inventory traded as excessive as $101.65, a brand new all-time peak.
Morgan Stanley analyst Katy Huberty likewise repeated her Overweight score on Seagate shares, upping her goal worth to $114 from $98. She wrote that the Chia farming phenomenon is bettering each the availability and demand steadiness within the drive trade, and boosting manufacturing facility utilization and margins. Huberty in contrast the impression of Chia farming on the trade to the devastating flooding in Thailand in 2011, which just about in a single day shut down a substantial portion of the trade’s manufacturing capability. Huberty famous that channel inventories are working close to file lows, whereas pricing is bettering, notably for mass capability drives.
Citi analyst Jim Suva repeated his Neutral score on Seagate shares and upped his goal worth to $100 from $85 on Wednesday morning. Suva additionally famous that there’s surging demand from “interest storage farmers for Chia.” If that continues, he provides, “it may end in greater pricing past distribution and impression the enterprise pricing for storage additionally.”
Suva stated that he thinks pricing goes to be greater than anticipated “for a number of quarters,” driving quicker earnings-per-share development and higher manufacturing facility utilization. “Given the sturdy channel demand, Seagate’s stock will possible be materially under regular within the June quarter, thereby organising for no less than just a few extra quarters of sturdy pricing.”
Write to Eric J. Savitz at [email protected]