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Seagate Technology (NASDAQ:STX) shares jumped at the open Thursday following its latest earnings results, which gave analysts at Morgan Stanley and Credit Suisse slightly more confidence in the company’s recovery.
Credit Suisse analysts maintained a Neutral rating and $69 price target on Seagate, stating the company’s earnings signal that the quarter is the trough, but the recovery will be slow. The “better than expected results” were due to slower shipment declines and headcount reductions, the analysts said. They added that customer inventories also improved during the quarter.
“The reopening of China during the quarter did not immediately benefit demand but leaves the company with greater confidence that F2Q23 was the trough,” the analysts wrote.
Meanwhile, Morgan Stanley was more optimistic, with analysts raising their price target on the stock to $72 from $69, maintaining an Overweight rating. They confirmed STX “handily” beat the firm’s December quarter expectations, and that they were encouraged by the results.
“We believe STX is in the midst of the recovery we pointed to in our 2023 Industry Outlook, as inventory at customers continues to get worked down, and China slowly emerges from COVID lockdowns,” Morgan Stanley analysts said.
While the firm still does not expect a severe snapback in growth for STX near term, the analysts stated that Seagate management made it clear that many of its end markets are still facing pressures.
“But we also still believe STX is undershipping vs. demand, which sets up for sequential improvements in fundamentals into C2H23,” they concluded.
