After a 14% rise in Seagate stock (NASDAQ: STX) this year, outperforming the broader S&P500 index, which is up 8%, we believe STX is now fully valued. Looking at a slightly longer term, STX stock is down 47% from levels seen in late 2021. This can be attributed to 1. the company’s P/S ratio falling a significant 45% to 1.3x trailing revenues, 2. Seagate’s revenue decline of 12% to $9.4 billion, partly offset by 3. a 9.6% fall in its average total shares outstanding to 209 million. Our dashboard on Why Seagate Stock Moved has more details.
A decline in Seagate’s sales can be attributed to weak consumer demand and higher inflation. Total smartphone shipments plunged 11.3% y-o-y to 1.2 billion units, marking the lowest annual shipment since 2013.  This has impacted the overall demand for storage as well. The unfavorable macroeconomic conditions and storage price erosion have added to Seagate’s worries. The company expects volume to pick up in early 2024 (calendar). Although the company saw its sales decline in recent years, its operating margin expanded from 16.0% in 2021 to 18.9% in 2022 before falling to 13.0% for the last twelve months period due to price erosion and lower production levels. Our Seagate Operating Income Comparison dashboard has more details.
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Looking at its stock price, we estimate Seagate’s valuation to be $64 per share, reflecting only a 6% upside from its current level of $60. STX stock is trading at 1.4x its trailing revenues, compared to the last five-year average of 1.2x, implying it is appropriately priced. Our Seagate Valuation Ratios Comparison dashboard offers more details.
Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Barnes vs. Seagate.
Despite higher inflation and the Fed raising interest rates, STX stock has risen 14% this year. But can it drop from here? See how low Seagate stock can go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
What if you’re looking for a high-performance portfolio with a low downside instead? Here’s a reinforced value portfolio that has beaten the market consistently while limiting losses during periods of sharp market declines.
|S&P 500 Return||0%||8%||85%|
|Trefis Multi-Strategy Portfolio||-1%||8%||240%|
 Month-to-date and year-to-date as of 5/26/2023
 Cumulative total returns since the end of 2016