Seagate Technology: Deep Value Buy from Here

Hard disk manufacturers continue to trade at attractive discounts. When Seagate (NASDAQ:STX) posted Q1/2021 earnings, it raised its dividend by 3% and said it would buy back $3 billion worth of its shares.
In the first quarter, Seagate posted revenue of $2.31 billion. It earned 86 cents GAAP (93 cents non-GAAP). Its dividend is now 67 cents quarterly.

Unlike Western Digital (NASDAQ:WDC), which posted disappointing results last quarter, Seagate benefited from a recovery in the video and image applications market. Demand for cloud data center led to strong year-on-year revenue growth.

In December, it will launch its first HAMR drives. This is a milestone, as it addresses the growing demand for mass capacity storage.

Outlook

Seagate forecast revenue of $2.55 billion. Non-GAAP diluted EPS will be $1.10 (plus or minus 15 cents). To increase shareholder value, Seagate will now buy back up to $4.2 billion in stock. Management is signaling its view that shares are undervalued. At a forward P/E near 10 times, the stock is inexpensive.

Plus, income investors collect a dividend that is around 5%. As data demand grows over the next few years, Seagate is the stock to buy and hold for the long term.