Seagate Technology (STX -1.40%) stock has rallied over the last year thanks to cyclical improvements in the data storage industry and expectations that rising demand for artificial intelligence (AI) could become a major performance catalyst. The company's share price is up 11% across 2024's trading and 54% over the last 12 months, and some on Wall Street think that the stock is heading even higher.
In a note published on March 26, Morgan Stanley raised its rating on Seagate stock from equal weight to overweight and raised its price target from $73 per share to $115 per share. Hitting Morgan Stanley's price target would mean a new all-time valuation high for Seagate and upside of roughly 21% from where shares are trading as of this writing.
The stars could be aligning for Seagate
Citing strong industry positioning, cyclical improvements for the space, and increasing demand tied to the rise of generative AI technologies, Morgan Stanley now thinks that Seagate's earnings for this year could come in between 25% and 30% higher than it had previously anticipated. Even better, it sees storage needs for artificial intelligence (AI) technologies becoming a longer-term tailwind.
The market for hard drives and other data storage technologies tends to be highly cyclical, and it appears that tailwinds are now at Seagate's back.
With demand seemingly on track to pick up and signs that pricing trends could improve, Seagate could see its earnings improve dramatically over the next few years. While the extent to which AI will lift the company's business remains somewhat speculative, the rising tech trend appears poised to create new demand catalysts for data-storage solutions, and Seagate is potentially on the verge of a robust growth phase. I think that Morgan Stanley's analysts are correct in identifying the stock as a worthwhile investment.
