Seagate Earnings: No Trough Yet; We See More Declines Before a Cyclical Recovery

We maintain our $55 per share fair value estimate for no-moat Seagate Technology after poor fiscal 2023 fourth-quarter results showed us the firm is still very much in the throes of a hard disk drive market downturn. The HDD market is increasingly dependent on data center spending, and this was the fourth quarter of declining expenditure from these customers as they work through elevated inventories built up during postpandemic demand. Fiscal 2023 was rough, and we expect more sales declines in fiscal 2024. We remind investors that Seagate is a cyclical business, and we do expect a significant rebound after the trough of this current downturn. Still, we see shares as fairly valued and would point investors to moatier names at the moment.