Summary
- Seagate is the market leader in hard disk drives with ~43% market share, according to Statista.
- Management has announced an aggressive cost-cutting program and aims to achieve a solid $200 million in annualized savings by Q1 FY2024.
- Approximately 83% of its Mass capacity shipments are provided to cloud and enterprise customers.
- The company is poised to benefit from the forecast growth in the hybrid cloud, and it even has a specialist product in this space (Lyve Cloud).
- In the trailing 12 months, the company has bought back 5.4 million shares and paid out $437 million in dividends.
Seagate (NASDAQ:STX) is the market leader in hard disk drives and a key supplier to the “hyperscale” cloud storage market. The company is facing headwinds from an industry-wide decline across computing parts and semiconductors, but this looks only to be a short-term issue due to the cyclical nature of the industry. In the meantime, income investors can receive a healthy dividend (4.49% forward yield) and admire the strong cash flow from operations ($228 million) in the recent quarter. Seagate has also repurchased 5.4 million shares in the trailing 12 months, and management has announced a bold cost-cutting program to improve margins. In this post, I’m going to break down the company’s business model, financials, and valuation; let’s dive in.
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