Morgan Stanley has reiterated its "Overweight" rating on Seagate Technology PLC (STX.US), maintaining a base target price of $270 while raising its bull case target to $341. The firm highlighted that Seagate expects its hard disk drive (HDD) sales to achieve gross margins exceeding 50% over the next 12 months due to strong cyclical demand.

Analyst Erik Woodring and his team stated, "At the same time, we've grown more comfortable with the risks that could derail this trend heading into 2026." "When we combine these factors, we believe revenue growth, margins, and EPS are trending toward—if not exceeding—our current bull case forecast of approximately $17 EPS for fiscal 2027, compared to our base estimate of $15.40 and the market consensus of $14.67. This provides further support for our $341 bull case target," Woodring added.

During meetings with Seagate, CFO Gianluca Romano emphasized that HDD demand is tracking "significantly" faster than the company's projected 25% annual storage capacity (exabyte) growth—potentially reaching about 40%. This suggests HDDs could remain supply-constrained through calendar 2027, even as the industry begins certifying new higher-capacity drives in early 2026.

"Equally notable in these discussions was the quality of HDD demand—indicating orders reflect genuine needs rather than inventory buildup or overordering that could jeopardize the cycle," Morgan Stanley noted. The firm also pointed out that Seagate faces minimal competition in HDD technology apart from Western Digital (WDC.US).