Seagate Posts Positive Q2 Preliminary Results, Stock Up

Seagate Technology Plc STX recently announced preliminary results for the second quarter of fiscal 2018.

The storage solutions provider expects higher revenues and margins in the quarter due to greater demand for its HDD products and operational efficiencies. The company is scheduled to report full second-quarter results before the market opens on Jan 29, 2018.

Following the announcement, the company’s shares surged nearly 7%, yesterday. Seagate’s stock has surged 23.9% in the past six months, substantially outperforming the 14.1% rally of the industry.

Expected Numbers

Seagate now expects revenues to be approximately $2.9 billion compared with an increase of 3-5% guided previously. The Zacks Consensus Estimates for revenues is currently pegged at $2.74 billion. The improvement can primarily be attributed to strong growth in exabyte demand.

The company expects exabyte shipments to be roughly 88 exabytes, which reflects drive shipments to be around 40 million and average capacity per drive to be approximately 2.2 terabytes.

Moreover, non-GAAP gross margin is anticipated to be 30%. Further, operating expenses on a non-GAAP basis are projected to be in the range of $390-$444 million. Previously, the company expectednon-GAAP operating expenses to decrease 2-3% with further cost stringent approaches.

According to Dave Mosley, Chief Executive Officer of Seagate, “Our revenue growth and strong portfolio profitability in the December quarter reflect solid demand for high-capacity mass-storage solutions, particularly for our cloud-based environments.”

Another factor that bolstered share price was Seagate’s agreement with Toshiba, per which the latter will provide Seagate with NAND supply, consequently helping in its innovation of hard disk drives (“HDD”), solid state drives (“SSD”) and hybrid solutions.

Last Words

Notably, with the huge transformations in the storage industry mobile cloud is taking the center stage. This in turn has provided a boost to the deployment of high-capacity mass storage products, which is beneficial for Seagate.

The company’s efforts in the improvement of areal density with the ramping up of its heat assisted magnetic recording (HAMR) technology, which is expected be shipped in 2019, is yet another positive.

Zacks Rank and Other Stocks to Consider

Seagate currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector include Applied Materials, Inc. AMAT, NVIDIA Corporation NVDA and Broadcom Limited AVGO, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Materials, NVIDIA and Broadcom have a long-term expected EPS growth rate of 12.7%, 10.3% and 13.8%, respectively.

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