Seagate Stock Is Off 27%. Why It’s Time to Buy the Dip in STX for 36% Upside.

Seagate Technology's (STX) stock has fallen more than 27% from its recent peak, giving back some of the gains from a strong year-long rally. The decline reflects both profit-taking and concerns about the sustainability of data center spending.

Investors are concerned that the hyperscale cloud providers could moderate capital expenditures, potentially slowing demand for AI infrastructure and, by extension, Seagate’s mass-capacity storage products.

Despite the pullback, Seagate’s underlying business remains solid, led by strong demand trends. The company continues to benefit from structural demand for data storage, while hyperscalers are still investing heavily in AI infrastructure. Thus, the recent weakness in STX could represent an opportunity to build or add to a position at a more attractive valuation.

Seagate’s Growth Isn’t Slowing Down Soon

Despite the concerns, Seagate enters fiscal 2027 with strong operating momentum and increasing visibility into demand. Fiscal 2026 revenue rose 34%, driven primarily by cloud customers expanding storage capacity as AI applications accelerate data creation and consumption. Further, Seagate’s management expects fiscal 2027 revenue growth to exceed fiscal 2026 levels, suggesting that the current upcycle has further room to run with no signs of a slowdown.

The key investment driver is sustained demand for mass-capacity storage. Data center customers now account for roughly 90% of Seagate’s exabyte shipments, while long-term supply agreements have already allocated most nearline capacity through calendar 2028. Customers are also discussing planning horizons extending into 2029 and beyond. This provides Seagate with greater demand visibility and adds stability to its earnings.

Further, Seagate’s HAMR-based Mozaic platform increases areal density, allowing more data to be stored on each drive. This is likely to drive strong demand. HAMR products represented about 40% of the company’s nearline exabyte shipment run rate exiting fiscal 2026, and the momentum is likely to sustain.

Cloud providers remain the primary source of nearline demand. Importantly, demand is broadening for the company. Enterprise and nearline revenue is growing for Seagate, while neocloud operators and leading AI model developers are adopting tiered storage architectures in which hard drives remain the foundation for high-volume data.

The longer-term opportunity for the company extends beyond today’s AI infrastructure. Robotics, autonomous vehicles, and other physical-AI applications could generate and retain enormous volumes of video and sensor data, increasing storage requirements and working in favor of companies like Seagate.

Beyond a strong top line, Seagate is also strengthening its bottom line and growing free cash flow. In fiscal 2026, Seagate’s adjusted gross margin expanded by 10 percentage points, while adjusted earnings per share increased by more than 90%. Further, Seagate reported free cash flow of $3.1 billion. Looking ahead, Seagate’s management expects both margins and cash generation to improve sequentially through fiscal 2027.

Overall, solid demand, product innovation, and expanding margins are likely to support a strong rebound in STX stock.

Seagate’s Valuation Supports the Bull Case

Seagate's valuation looks attractive following the recent pullback, especially when considered against its expected earnings growth. The company is positioned to benefit from sustained demand for high-capacity storage solutions, while improving margins will provide support to profitability.

At a forward P/E multiple of 23.1x, Seagate stock looks undervalued relative to its earnings outlook. Wall Street expects fiscal 2027 EPS to increase 143.7% to $35.70, reflecting expectations for continued demand for high-capacity drives and favorable pricing conditions. Analysts also project another 62% increase in EPS in fiscal 2028, suggesting that the momentum will sustain.

Overall, its attractive valuation, solid earnings growth trajectory, and favorable industry demand strengthen the investment case for Seagate.

Analysts Expect Further Upside for STX Stock

Analyst sentiment remains positive as Seagate’s business momentum strengthens. Wall Street currently maintains a “Strong Buy” consensus rating on STX stock.

The consensus price target of $1,133.91 implies roughly 36% upside over the next 12 months.

Strong demand, growing HAMR adoption, and improving margins provide a solid foundation for Seagate to deliver solid earnings growth. With fiscal 2027 EPS expected to surge and the stock trading at a reasonable forward multiple relative to that growth, the risk-reward profile has become increasingly attractive, indicating a sharp rebound.