Wells Fargo Just Upgraded Seagate Stock. Here's Why.

Seagate Technology (STX) is extending gains on Friday morning after a senior Wells Fargo analyst issued a bullish note in favor of the data storage specialist. 

Aaron Rakers now rates the Nasdaq-listed firm "Overweight" with a $1,100 price target, which signals potential for another 22% rally from current levels. 

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His constructive view is particularly significant given that Seagate stock is already trading at more than 3x its price at the start of this year. 

Seagate Stock to Rally After Q4 Earnings

Aaron Rakers recommends loading up on STX stock mostly because the artificial intelligence (AI) infrastructure buildouts are creating strong, durable demand for high-capacity storage from cloud service providers. 

The Wells Fargo analyst remains fully convinced that Seagate's upcoming fourth-quarter earnings will solidify long-term market confidence and drive meaningful multiple expansion. 

Consensus is for the company to record $4.89 per share of earnings for its fiscal Q4 in early August, more than double its EPS in the same quarter last year. 

Note that Barchart also currently holds an "80% BUY" opinion on Seagate Technology, indicating technical momentum also currently favors continued upside ahead. 

STX Shares Offer Multi-Year Revenue Visibility

Aaron Rakers expects exabyte-scale hard disk drive (HDD) storage demand to accelerate over the next two years given cloud companies and hyperscalers are locked into procurement agreements.

This provides Seagate with exceptional multi-year revenue visibility that could sustain its upward trajectory over the long term.

On a forward basis, STX currently trades at roughly 31x earnings, which the Wells Fargo analyst doesn't view as expensive for a major artificial intelligence beneficiary. 

All in all, nearline hard drive shipment capacity is primed for a sustained annual growth rate of more than 25% and average selling prices (ASPs) will increase at a mid-to-high single-digit pace, potentially helping Seagate shares print a new all-time high by year-end, he concluded.