STX vs. P: Which Storage Stock Deserves a Spot in Your Portfolio?

Although both companies operate within the storage ecosystem, they target different markets and have distinct growth drivers. The major distinction between the two companies lies in their storage technologies.

So, which stock deserves a place in your portfolio?

The Case for STX Stock

Seagate recently wrapped up fiscal 2026 on a high note, reporting better-than-expected fiscal fourth-quarter results. Fueled by surging demand for cloud data centers, accelerating AI adoption and the continued execution of its HAMR-based technology roadmap, Seagate posted record profitability and free cash flow, providing an encouraging outlook for the first quarter of fiscal 2027. The robust performance reinforces its position as one of the biggest beneficiaries of the exploding demand for mass-capacity storage, making the company an increasingly attractive play on AI infrastructure.

Training and deploying AI models generate massive datasets that must be stored economically. While GPUs perform AI computations, much of the underlying data ultimately resides on high-capacity HDDs because storing exabytes of information entirely on flash remains prohibitively expensive. Cloud providers continue expanding storage capacity, creating strong demand for Seagate's newest HAMR drives. Management projected September-quarter revenue of $4.1 billion and non-GAAP EPS of $7.30, highlighting that 2027 contracts are shaping pricing and configurations, while demand has pushed nearline capacity allocations into calendar 2028 as Mozaic 4 adoption expands.

Pricing per exabyte rose about 10% year over year in June and is expected to increase roughly 20% in September, supported by strong demand, supply constraints and value-based pricing. Seagate continues to target mid-20% exabyte CAGR, with factory investments and higher-capacity drive transitions expected to sustain more than 30% exabyte growth into fiscal 2027. HAMR's share is increasing as the industry shifts toward higher areal density, with a focus on ramping to 50% by 2026.

One of Seagate's key strengths is its operating leverage. STX expanded its non-GAAP gross margin for the 13th consecutive quarter. Fourth-quarter non-GAAP gross margin reached 52.7%, up 570 basis points (bps) sequentially and 1,480 bps year over year. Beyond strong revenue and margin growth, Seagate demonstrated exceptional cash generation. Free cash flow reached $1.12 billion in the June quarter, representing a margin of approximately 31%, while fiscal 2026 free cash flow climbed to a record $3.1 billion. Management expects cash generation to improve sequentially throughout fiscal 2027, supported by revenue growth, pricing, operating leverage and capital expenditures maintained within 4–6% of revenues.

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Furthermore, strong cash generation enabled management to reduce debt by $302 million in the fiscal fourth quarter and $1.4 billion during fiscal 2026, ending the year with $3.6 billion in debt and $1.7 billion in cash. The stronger balance sheet enhances financial flexibility, lowers interest costs and supports long-term shareholder value. It plans to retire an additional $1.2 billion in debt during the September quarter, including $1 billion already redeemed in July. STX continues to reward investors through a balanced capital return strategy. During fiscal 2026, the company returned $810 million to shareholders through quarterly cash dividends and repurchases.

The Case for P Stock

P faces mounting headwinds from intensifying competition in flash storage, which could pressure pricing and hurt results if volumes fail to scale. Higher NAND costs versus disk alternatives threaten margins, while customers remain cautious amid rising software, SaaS and cloud expenses and uncertainty around AI spending. It operates in a fluctuating macroeconomic backdrop. Conditions are likely to deteriorate further before improving, given the current backdrop of macroeconomic uncertainty, margin pressure and ongoing investment needs. 

Everpure is operating in a highly dynamic macro environment marked by a severe supply chain crisis, primarily driven by insatiable AI demand. This has led to rapidly rising costs and unpredictable component shortages. Management described the situation as unprecedented, noting that costs and component shortages now change rapidly and are difficult to predict with certainty. The company is experiencing a sharp and continuing rise in the costs of components, which has forced the entire high-tech industry to raise prices.

Product gross margins have been pressured, with the management noting a sequential decrease of 180 bps in product gross margin due to increased commodity costs, only partially offset by price increases. Everpure has chosen to operate at the lower end of its product gross margin range to help customers, which adversely impacts profitability in the short term. The price increases, while necessary, are a concern for customers. The company estimates that higher pricing and customer purchase acceleration, to secure product availability and avoid future price hikes, accounted for nearly a third of fiscal first quarter year-over-year revenue growth, suggesting some demand may be pulled forward rather than sustainable.

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While Everpure anticipates that product gross margins will recover in the second half of the year, the improvement is likely to be gradual as pricing strategies catch up with ongoing, volatile and rapidly rising input costs. Additionally, the recent acquisition of 1Touch is expected to be approximately $12 million dilutive to operating profit in fiscal 2027, with positive effects only expected within 24 months after the acquisition. P acknowledged that some of the current strength results from customers accelerating purchases to avoid future price hikes, which might affect demand sustainability in the second half of fiscal 2027 and beyond.

These headwinds are significant but are being proactively managed by Everpure through transparent communication, careful pricing and strategic investments. Nonetheless, they pose real risks to near-term profitability, margin recovery and demand stability.

Price Performance and Valuation for STX & P

Over the past six months, STX and P have registered gains of 96.7% and 6.7%, respectively.

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Valuation: Premium vs. Discount

STX looks more attractive than P from a valuation standpoint. Going by the price/earnings ratio, P’s shares currently trade at 63.63 forward earnings, way more than 27.99 for STX.

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How Do Zacks Estimates Compare for STX & P?

STX is currently witnessing an uptrend in estimate revisions. Earnings estimates for fiscal 2027 have soared 12.7% to $29.7 over the past 60 days, while the same for fiscal 2028 has gone up 17.3% to $50.4.

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The Zacks Consensus Estimate for P’s earnings for fiscal 2027 has been stagnant over the past 60 days.

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STX or P: Which Stock Fits Your Portfolio?

Both Seagate and Everpure stand to benefit from the explosive growth in AI-driven data creation, but they offer different investment profiles.

Seagate appears better suited for investors seeking value, dividends, robust cash flow and upside from expanding HDD demand driven by hyperscale cloud providers. Its improving margins, HAMR innovation and shareholder-friendly capital allocation strengthen the long-term investment case. Everpure, on the other hand, offers potential growth built around flash storage, software and AI-ready enterprise data platforms. But its premium valuation, heavy dependence on enterprise capital spending and exposure to flash memory costs introduce additional risks.

Seagate may appeal to investors seeking a combination of income and AI-driven infrastructure exposure, and it represents the better risk-adjusted opportunity due to its strong profitability, cash generation, and reasonable valuation. STX at present flaunts a Zacks Rank #1 (Strong Buy), while P has a Zacks Rank #4 (Sell). Consequently, in terms of Zacks Rank and valuation, STX seems to be the more attractive pick right now. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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