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The Storage Trade Is Crowded, But You Still Should Not Step In Front Of It

You are not looking at a hidden gem here. You are looking at a stock that already had a monster run, already got the AI halo, and already has expectations piled on top of it. 

The business still looks strong. Your job now is not to get excited. Your job is to be disciplined. 

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What Just Happened

The stock ripped to another high

Seagate Technology (NASDAQ: STX) pushed to another all-time high around $554 on April 21, then kept climbing in after-hours trading near $566. The move is simple to explain: investors still believe enterprise and hyperscaler demand for storage has room to run.

Wall Street is still leaning bullish

Morgan Stanley recently made Seagate its top pick in the group and lifted its target to $582. Cantor Fitzgerald pushed its target to $650. Bank of America expects fiscal Q3 2026 revenue of $3.02 billion and EPS of $3.70, both above consensus. UBS is the main cautious voice, with a $515 target and the view that the HDD downturn is delayed, not gone.

Earnings are the next real test

Seagate reports fiscal Q3 2026 results on April 28, 2026 after the close. That matters because after a run like this, the stock needs another clean quarter. Hope is not enough anymore. 

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What The Business Actually Does

The simple version

Seagate makes data storage hardware, mainly hard disk drives.

Why that matters more now

That sounds old-school until you look at what AI is doing to data creation. AI models, training datasets, enterprise backups, cloud archives, and hyperscaler storage needs are all exploding. Somebody has to store that data cheaply and at scale. That is exactly where Seagate sits. 

This is why the market stopped treating Seagate like a mature hardware name and started treating it like AI infrastructure. 

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Why The Market Cares Again

1) Revenue growth is back

Seagate’s trailing twelve-month revenue growth is around 25%, and fiscal Q2 2026 revenue came in at $2.83 billion. This is not a stock running on a story alone. The top line is moving.

2) Margins are expanding

In fiscal Q2 2026, Seagate posted 41.6% GAAP gross margin and 42.2% non-GAAP gross margin, along with $3.11 non-GAAP EPS. That matters because the bull case is not just about more demand. It is also about better earnings quality.

3) The HAMR story is helping

The Mozaic HAMR platform is the technology angle behind the run. The pitch is simple: more storage capacity per drive, better economics, and stronger long-term demand from hyperscalers that need more capacity without blowing up their costs. 

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What The Financials Are Signaling

This is a stronger business than it was a year ago

Fiscal Q2 2026 was not just fine. It was strong. Seagate reported $2.60 GAAP EPS, $3.11 non-GAAP EPS, $723 million in operating cash flow, and $607 million in free cash flow. It also maintained its dividend at $0.74 per share.

This is a capacity story now

The cleaner way to frame Seagate is not as a memory trade. It is a capacity trade. As the world creates more data, especially AI-related data, lower-cost mass storage becomes more valuable. That is why the stock keeps working even after a huge run. 

The Valuation Problem No One Should Ignore

The stock is expensive

At roughly 63x earnings, this is not a cheap value story. One valuation framework in the material you shared puts fair value closer to $483, while a separate DCF lands nearer $618. That tells you exactly where the debate is: the business is strong, but the stock is already pricing in a lot of the good news. 

Expectations are the real risk now

A year ago, you were buying a recovery story. Now you are paying for continued strength in hyperscaler demand, successful HAMR adoption, and another round of strong earnings. That can still work, but the stock has very little room for a messy quarter. 

What Needs To Happen Next

Beat on April 28

This is the main event. If Seagate delivers something close to the bullish view of $3.02 billion in revenue and $3.70 in EPS, the stock can keep moving higher.

Keep the hyperscaler story alive

The bull case rests on continued demand from cloud and enterprise customers. If that demand starts looking like it is peaking, the stock gets repriced fast.

Keep proving HAMR is driving profits

The Mozaic story is already in the stock. Management now needs to keep showing that the technology improves mix, margin, and revenue in real numbers, not just presentations. 

The Risks You Should Take Seriously

The stock is overbought

The momentum is obvious, but so is the stretch. Several market notes have flagged the shares as overbought. That does not end the rally, but it does make timing matter more.

Expectations are very high

The stock has gained more than 600% over the past year. At this point, even a good quarter can disappoint if it is not good enough.

The cycle can still turn

Storage is still cyclical. If AI spending cools, cloud orders get pushed out, or competing storage technologies change the economics, the market will rerate this quickly. The valuation note also flagged trade policy and rival technologies as real risks.  

How I’d Frame A Position

Hold it, do not chase it

Seagate still looks strong. The business is delivering, the AI storage thesis is real, and Wall Street is still leaning bullish. But after a run like this, buying aggressively right before earnings is not smart. 

If you already own it, stay with it. If you are not in, wait for one of two things: a post-earnings dip or another clean beat that resets the risk. 

Bottom Line

Seagate is one of the clearest AI infrastructure winners in hardware right now. Revenue is up, margins are up, free cash flow is strong, and the market still believes the storage boom has more room to run. 

That view is supported by the numbers. But the stock is no longer cheap, and the next move depends on execution, not excitement. 

Action Recap

✅ What’s working: hyperscaler storage demand, stronger margins, and a credible HAMR upgrade story
✅ What to watch: the April 28 earnings report, hyperscaler demand, and Mozaic adoption
⚠️ Big risk: expectations are so high that even a good quarter can trigger a sell-the-news reaction
🧭 Best mindset: Hold if you own it. Do not chase it here. Buy only on a post-earnings dip or after another clean beat.

That’s our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out. 

Best Regards,
—Noah Zelvis
Tech Stock Insider 

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