Is STX Stock Still Attractive After Its Massive 2026 Price Rally?

STX’s Earnings Growth Supports the Bull Case

Seagate reported fourth-quarter non-GAAP earnings of $5.71 per share, above the $5.10 consensus estimate. Earnings climbed 121% year over year, reflecting a sharp recovery in profitability.

Revenues rose 48% year over year to $3.6 billion. For fiscal 2026, revenues increased 34%, showing that the rebound was not limited to a single quarter. Western Digital Corporation WDC remains a direct hard-drive peer, making Seagate’s execution important in a storage market being reshaped by cloud and AI demand.

STX’s Fiscal 2027 Outlook Raises Expectations

For the first quarter of fiscal 2027, Seagate expects revenues of $4.1 billion, plus or minus $100 million. At the midpoint, that implies 56% year-over-year growth.

Management also projects non-GAAP earnings of $7.30 per share, plus or minus 20 cents, and a non-GAAP operating margin near 50%. The Zacks Consensus Estimate for fiscal 2027 revenues is $16.64 billion, while the consensus estimate for earnings is $27.83 per share.

STX’s Valuation Leaves Little Room for Error

The stock trades at 14.36 times trailing sales. That compares with 8.53 times for its industry, 8.04 times for the broader technology sector and a five-year median of 2.39 times.

The $890 target assumes 16.5 times trailing sales. That leaves little room for disappointment. Seagate needs continued cloud demand, firm pricing and high-margin HAMR adoption to keep the valuation from becoming a headwind.

STX’s Cash Flow and Deleveraging Add Support

Cash generation strengthens the investment case. Seagate generated record fiscal 2026 free cash flow of $3.1 billion, including $1.12 billion in the fourth quarter.

The company also reduced gross debt by $1.4 billion during fiscal 2026 and planned further note retirements after year-end. It returned approximately $810 million through dividends and repurchases during the fiscal year, giving shareholders a cash-return component alongside the growth story.

STX’s Execution and Customer Risks Shape the Downside

The downside case starts with expectations. If cloud customers slow spending, product qualifications take longer or HAMR manufacturing yields disappoint, revenue timing and margin expansion could both come under pressure.

Customer concentration adds another risk. A more volatile macro backdrop, trade restrictions or foreign exchange pressure could amplify any slowdown. Competition from Western Digital and solid-state storage providers such as Everpure P, formerly Pure Storage, also keeps pricing and technology execution under scrutiny.

STX’s Signals Favor Growth Over Value

Seagate’s setup still leans positive, but the case is no longer based on a cheap recovery multiple. It is based on earnings growth, pricing discipline, operating leverage and the company’s ability to convert AI-related storage demand into cash flow.

STX currently carries a Zacks Rank #1 (Strong Buy), a favorable near-term signal tied to earnings estimate trends. The Growth Score of A supports the bullish growth profile. You can see the complete list of today’s Zacks #1 Rank stocks here.

The trade-off is valuation and timing. STX has a Value Score of F, a Momentum Score of D and a VGM Score of D. These scores point to a growth-driven opportunity rather than a conventionally inexpensive stock, making execution the key test after the massive rally.

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This article originally published on Zacks Investment Research (zacks.com).

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