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Seagate Technology (STX) is a major player in the data storage industry, known for its innovations in hard disk drives (HDDs) and, more recently, its advancements in solid-state drives (SSDs).
On Feb. 13, the company announced its intention to acquire Intevac (IVAC), a provider of thin-film processing systems. Analysts have taken note of this acquisition and how it could improve the company’s production capabilities and market position, projecting as much as 55% upside potential for STX stock.
So far, Seagate has gained 19.3% this year, compared to the broader market gain of 4.4%. Let’s find out in what ways this acquisition could benefit the company and whether that makes Seagate stock a buy now.
Seagate’s Financials Are Getting Stronger
Seagate’s product map is experiencing strong momentum. In the second quarter of its fiscal 2025, Seagate reported revenue growth of 49.5% to $2.33 billion. Adjusted earnings per share (EPS) stood at $2.03, surpassing analysts’ expectations of $1.88 and much higher than $0.12 in the year-ago quarter. This strong performance is due to the growing demand for high-capacity storage solutions, particularly from cloud service providers and enterprises that focus on artificial intelligence (AI) applications. Seagate generated $150 million in free cash flow and distributed $148 million in dividends during the second quarter. Management emphasized the importance of mass storage in AI development, which Seagate can benefit from. Furthermore, Video and Imaging Analytics (VIA) represents another lucrative market, with AI analytics driving demand for high-capacity storage solutions.
In January, the company announced that it is increasing volume shipments of 32TB Exos M drives to a major cloud provider and testing up to 36TB models. Seagate’s Mozaic 3+ platform, which includes heat-assisted magnetic recording (HAMR) technology for increased storage density and efficiency, powers the Exos M drives. CEO Dave Mosley highlighted in the press release, “We’re in the midst of a seismic shift in the way data is stored and managed. Unprecedented levels of data creation – due to continued cloud expansion and early AI adoption – demand long-term data retention and access to ensure trustworthy data-driven outcomes.”
A Strategic Acquisition to Boost Growth
Following a strong quarter, the company announced its intention to acquire Intevac (IVAC), which specializes in thin-film deposition equipment for the hard disk drive (HDD) industry, thereby improving storage density and performance. The goal of this acquisition is to gain Intevac’s HDD-related thin-film processing technology, which will benefit Seagate’s storage business. Intevac's flagship system, the 200 Lean platform, also supports the production of advanced HDD media, such as HAMR. The deal values Intevac at around $119 million and is expected to close in late March or early April 2025, pending regulatory and closing conditions. Seagate expects minimal short-term earnings impact but long-term accretion to earnings per share.
During the Q2 earnings call, management discussed the supply constraint that the company experienced in the third quarter ending March. These supply constraints could have a $200 million impact on Q3 revenue, leading to its revenue forecast of $2.1 billion (plus or minus $150 million). Adjusted EPS could be about $1.70, plus or minus $0.20. The CEO assured investors and analysts that the supply constraint is “limited to this quarter only,” emphasizing that Seagate’s commitment to predictability remains unchanged. The company is confident that improvement will continue throughout the fiscal year, ensuring that overall results are unaffected in the long run.
Despite the near-term supply challenges, Seagate remains confident in its long-term growth trajectory. The company anticipates that the shift to higher-capacity drives will continue to support margin improvements through 2025. With the upcoming ramp-up of HAMR technology and a disciplined approach to capacity expansion, management expects the company to maintain profitable growth in fiscal 2025. For the full year, analysts expect earnings per share of $6.88, up 888%. For the full fiscal 2026, they expect another 60% jump to $10.91.
What Does Wall Street Say About Seagate Stock?
Speaking about the acquisition, TD Cowen analyst Krish Sankar stated that he believes Intevac will improve Seagate’s supply chain capabilities and help advance its HAMR technology. Sankar reiterated his "Buy" rating for the stock, with a price target of $135. Overall, on Wall Street, Seagate stock is a “Moderate Buy.” Of the 20 analysts that cover the stock, 12 rate it a “Strong Buy,” one rates it a “Moderate Buy,” five rate it a “Hold,” and one says it is a “Strong Sell.” The average target price of $122.11 suggests the stock can rally as much as 18.4% over current levels. Plus, the high target price of $160 suggests upside potential of 55% over the next 12 months.
