Why Seagate Technology Stock Is Soaring Today

Seagate Technology (STX 8.58%) stock is climbing rapidly in Tuesday’s trading. The memory chip company’s share price was up 9% as of 3 p.m. ET, according to data from S&P Global Market Intelligence.

Morgan Stanley published a note on Seagate this morning, raising the firm’s rating on the stock from equal weight to overweight. The firm’s analysts also raised their one-year price target on Seagate stock from $73 per share to $115 per share.

Morgan Stanley expects Seagate shares to hit a new peak

Despite climbing roughly 56% over the last year, Seagate stock is still down roughly 17% from its high. The latest coverage from Morgan Stanley indicates that the firm believes that the storage hardware specialist will go on to reach a new valuation high in the near future.

Morgan Stanley’s analysts expect that Seagate will benefit from continued recovery in the data storage market. The firm also expects that the company’s forefront position in heat-assisted-magnetic-recording (HAMR) technologies will unlock stronger sales and earnings performance. Likely even more exciting for many investors, the analysts thinks that demand connected to the rise of generative artificial intelligence (AI) will wind up being a meaningful performance driver.

Storage companies could ride the AI wave

With the data storage industry seemingly on a cyclical upswing and seeing new demand tailwinds related to AI, Seagate’s profitability could improve significantly. In the research note published today, Morgan Stanley’s analysts stated that the storage specialist’s near-term earnings performance could be between 25% and 30% better than they had previously anticipated.

Beyond powering stronger-than-expected profits this year, Wall Street seems to be warming up to the possibility that AI-related demand will deliver a more sustained performance boost. In addition to improving sales and earnings performance, it’s possible that being connected to the artificial intelligence revolution will broadly encourage investors to assign higher valuation multiples to Seagate and other data-storage stocks.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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