Tech Stocks to Buy: Seagate (STX)
Forward P/E Ratio: 9
YTD Performance: 15%
Conservative guidance from hard-disk maker Seagate Technology plc (NASDAQ:STX) ended the uptrend in the stock. While the company beat third-quarter estimates, it considered seasonal declines and component shortages when it issued its forward guidance. Seagate earned $1.10 a share on revenue of $2.67 billion. Gross margin of 30.5% from Q1 will follow with 31% in the current quarter. The company forecast earnings of $4.50 for the 2017 year.
The company’s Cloud Systems and Silicon Group reported growth of 19% Y/Y. It benefited especially from sales of Flash-based solutions. When asked how it would grow the company, CEO Luczo said:
“We continue to work the financial model so the Systems business is profitable to the overall business and then gives us the option to grow into some of these markets if we see either OEMs or CSPs decide that they want to see solutions at the systems level versus the device level. And we still believe that’s the opportunity in front of us.”
Demand for storage is strong. Cloud computing keeps growing and data centers will sustain demand for hard disk drives. Seagate’s plunge after the earnings report is overdone. The stock’s forward P/E is just 9.47 times and its dividend yields 5.9%. Profits from data storage solutions are not going away. NAS, DDR and consumer surveillance all need large-capacity hard drives. The steady business makes Seagate suitable for both value investors and income investors.