We initiate on STX with a Buy, $172 PT. A global leader in mass-capacity data storage solutions, Seagate Technology Holdings plc offers next-generation hard drives for hyperscale, enterprise, and consumer workloads. Beneath its relatively unsexy HDD industry frame, sits a once-in-4-yrs+ earnings regime shift poised by clear HAMR lead and aggressive margin roadmap. Co’s FY26 D EPS climbs to $10.10 – well ahead of Cons – driven by CSP quals, which we model as the clear lead indicator for step-function mix, margin structure and earnings profile. As HAMR ramps, GM looks set to hit 37.5% next fiscal year and expand further off not just Mozaic platform mix benefit but also incremental supply discipline and debt paydown tailwinds. We apply a 17.0x multiple to FY26E EPS growth, cognizant both of exceptional +35% earnings growth and the need for relative discount from PE highs given visible valuation froth and insider sales of late. We take the contrarian view here, with a sense that the market lacks clear appreciation for magnitude of earnings outperformance potential in next 2 yrs, while acknowledging persistent execution risk around HAMR yields and external tariff exposure. Risk/reward is skewed positive on our numbers, with path to +21% upside supported by credible operating leverage and maturing technology cycle that augments Seagate’s structural tailwinds.
Balance Sheet Leverage Builds
We believe Seagate’s HAMR transition is a structural inflection in its margin profile that the street is underestimating. The initial volume ramp of Mozaic HAMR drives has sparked a fundamental mix shift that drove gross margin to 36.2% in Q3, marking 8 straight quarters of expansion despite