Is Seagate Stock Fully Priced At $70 After A 35% Rise This Year?

Seagate (NASDAQ: STX) recently reported its Q1’24 results, which showed that the company’s revenues and earnings fell short of expectations. Despite a 35% rise in Seagate’s stock this year, we believe that it may be fully priced at $70. The stock has experienced inconsistent performance in the past, making it difficult to beat the S&P 500. Moreover, the uncertain macroeconomic environment and weak demand outlook for storage companies raise concerns about Seagate’s future performance. With a valuation that suggests a 10% downside from its current levels, investors may want to consider other stocks in the Information Technology sector.

Is Seagate Stock Fully Priced At $70 After A 35% Rise This Year?

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In this article, we will take a closer look at Seagate’s Q1’24 results and discuss how the company’s stock has been performing. We will also explore the macroeconomic environment and its impact on Seagate’s valuation. Additionally, we will analyze the sales outlook for the company and compare it to its peers in the industry.

Seagate’s Q1’24 Results

Revenue and earnings missing estimates

Seagate recently reported its Q1’24 results, and unfortunately, both its revenue and earnings fell short of the estimates made by financial analysts. The company reported revenue of $1.45 billion and an adjusted loss of $0.22 per share. This was lower than the consensus estimates of $1.53 billion in sales and a loss of $0.19 per share. While these results may be disappointing, it’s important to dive deeper and understand the bigger picture.

Stock Performance

STX stock gains of 15% in 2021

Inconsistent performance over the years

Comparison with S&P 500 performance

Looking at the performance of Seagate’s stock, we see that it has had a gain of 15% in 2021. However, when we examine its performance over the years, we notice a lack of consistency. In 2022, the stock saw a significant decline of 53%, while in 2023, it had a strong recovery and gained 35%. In comparison, the broader market index, the S&P 500, had returns of 27% in 2021, -19% in 2022, and 14% in 2023. This means that Seagate underperformed the S&P 500 in 2022. It’s worth noting that beating the market consistently has been challenging for individual stocks in recent years, even for major players in the tech industry. However, the Trefis High-Quality Portfolio, which is a collection of 30 stocks, has consistently outperformed the S&P 500. This suggests that investing in a diversified portfolio may be a more reliable strategy.

Trefis High Quality Portfolio

Outperformance compared to S&P 500

The Trefis High-Quality Portfolio has proven to be a successful investment option, consistently outperforming the S&P 500 over the years. This portfolio comprises a carefully selected group of 30 stocks that have provided better returns with less risk compared to the benchmark index. Investing in the Trefis High-Quality Portfolio offers a smoother ride for investors, as seen in its performance metrics.

Is Seagate Stock Fully Priced At $70 After A 35% Rise This Year?

Macroeconomic Environment

Uncertain environment with high oil prices and elevated interest rates

Seagate operates within a macroeconomic environment that is currently experiencing uncertainty due to factors such as high oil prices and elevated interest rates. These factors can have a significant impact on the company’s operations and financial performance. It’s crucial to consider the broader economic landscape when evaluating Seagate’s prospects.

Valuation Perspective

STX stock looks fully priced

Estimated valuation at $63 per share

Trading at 1.8x revenues compared to 5-year average of 1.2x

From a valuation perspective, the current price of Seagate’s stock, also known as STX, appears to be fully priced. Our estimation suggests that the fair valuation for STX is around $63 per share, indicating a potential downside of 10% from its current price of $71. Additionally, STX is trading at a price-to-sales (P/S) ratio of 1.8x, which is higher than its five-year average of 1.2x. This increase in the P/S ratio can be attributed to a significant decline in sales. It’s crucial to carefully evaluate these valuation metrics before making any investment decisions.

Is Seagate Stock Fully Priced At $70 After A 35% Rise This Year?

Sales Outlook

Significant decline in sales in fiscal 2023

Weak demand outlook for PCs and storage companies

Seagate experienced a substantial decline in sales during fiscal year 2023, with a 37% decrease due to lower volume and price erosion in the storage industry. The demand outlook for PCs and storage companies remains weak. It is projected that PC shipments will fall by 14% in 2023, and tablet shipments will decline by 20%. However, there is expected to be a low to mid-single-digit recovery in 2024. These forecasts do not paint a positive picture for the overall demand for storage companies, including Seagate.

Q1’24 Results Analysis

Revenue decline of 29% YoY

Significant fall in net profit and earnings per share

In Q1’24, Seagate reported a 29% year-over-year decline in revenue. This decline was primarily driven by lower sales in the face of weak macroeconomic conditions. Additionally, the company experienced a significant fall in net profit and earnings per share. The adjusted net loss for Q1’24 was $46 million, which is a stark contrast to the $101 million profit reported in the same quarter of the previous year. The adjusted loss per share also dropped from $0.48 to $0.22.

Demand Outlook

Possible improvement in PC demand but uncertain due to potential recession

While there are signs of potential improvement in PC demand, it’s important to consider the uncertain macroeconomic conditions that could impact this outlook. A possible recession could hamper the demand for Seagate’s products, both in the enterprise and consumer space. With consumer spending taking a hit and businesses becoming more cautious in their investments, the demand for storage solutions may be affected.

Comparison with Peers

Evaluate peer performance and metrics

To gain a comprehensive understanding of Seagate’s position in the industry, it is important to compare its performance and metrics with those of its peers. By evaluating how Seagate stacks up against its competitors, we can better assess its strengths, weaknesses, and overall standing in the market.

In conclusion, Seagate’s Q1’24 results indicate that the company has fallen short of revenue and earnings estimates. The stock has seen inconsistent performance over the years, and current macroeconomic conditions pose challenges for the company. From a valuation perspective, the stock appears to be fully priced, and the sales outlook for the company is weak due to declining demand in the PC and storage industries. Investors may want to consider alternative options in the Information Technology sector. It’s crucial to thoroughly research and understand the market landscape before making any investment decisions.


Pramod Kumar Yadav is from Janakpur Dham, Nepal. He was born on December 23, 1994, and has one elder brother and two elder sisters. He completed his education at various schools and colleges in Nepal and completed a degree in Computer Science Engineering from MITS in Andhra Pradesh, India. Pramod has worked as the owner of RC Educational Foundation Pvt Ltd, a teacher, and an Educational Consultant, and is currently working as an Engineer and Digital Marketer.

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