Seagate (STX) is poised to continue outperforming its peers and the broader markets, cementing its position as a top pick after reporting better-than-expected fiscal Q2 results and issuing Q3 guidance in line with revised estimates, Morgan Stanley analysts said Wednesday in a new research note.

For fiscal Q3 ending in March, Seagate is expecting adjusted earnings of $1.50 to $1.90 per share on sales of $1.95 billion to $2.25 billion. Analysts polled by FactSet are expecting adjusted EPS of $1.73 on sales of $2.13 billion.

Seagate also appears to have resolved supply headwinds it faced earlier in its fiscal 2025 and is looking to improve most metrics from quarter-to-quarter throughout calendar 2025 and beyond, including gross and operating margins as well as per-share earnings and revenue, the analysts said.

Morgan Stanley analysts increased their price target on the data storage company to $134 from $129 per share while maintaining an overweight rating on the company's stock. The analysts said the new price target reflects expectations that demand for hard drives will remain strong and its gross margins "have more room to run and that consensus estimates are still too low."

STX shares were up 9% in recent trading.

Price: 110.27, Change: +9.02, Percent Change: +8.91