Summary

• I was dead wrong with my Hold rating on Seagate Technology Holdings plc earlier in February.
• Despite my valuation concerns and lower growth prospects, STX stock has outperformed memory peers, showing the market is willing to accept its richer premium for now.
• STX pricing power likely explained about $141 million of the $276 million sequential data center revenue increase in Q3 and lifted GAAP gross margin to 46.5%.
• STX stock valuation remains rich at 43x forward earnings. That said, I now own the stock, and my concern is no longer this multiple.
• Despite STX nearline capacity being almost fully allocated through calendar 2027, I am more concerned about how long the HDD supply-demand imbalance can support the pricing power.

Once again, I fell into the trap of giving valuation too much importance. Back in February, I rated Seagate Technology Holdings plc (STX) as a Hold, citing a richer premium than its peers in

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of STX, MU, SNDK either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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