Seagate Technology (STX) reported modestly better-than-expected fiscal Q4 results, and while guidance for the September quarter was just slightly below consensus, this is a buying opportunity, Morgan Stanley said in a note Wednesday.

According to the note, there are three key reasons for it. The hard-disk-drive, or HDD, market is getting stronger. Demand continues to outpace supply, pricing is improving, gross margins are rising, and there is better visibility into the H2 2026.

Second, Seagate's rollout of heat-assisted magnetic recording, or HAMR, technology is on track. Increasing the mix of HAMR-based products will help ease current capacity constraints and further boost margins.

Third, Morgan Stanley's estimates are going higher across the board due to better pricing, improved margins, disciplined spending and a restart of stock buybacks, Morgan Stanley said.

The analysts also said Seagate guided to $2.5 billion in revenue for the September quarter, which matched their expectations but was about 1% below Wall Street estimates.

However, the management expects that less capacity will be used for HAMR testing in the December quarter, compared with the September quarter. That shift should help drive stronger sequential revenue growth, assuming other factors remain unchanged, the note said.

The analysts said that with earnings momentum and a stronger thesis, they are buying the post-results dip and reaffirming their overweight rating and Top Pick status on Seagate Technology. Morgan Stanley also adjusted its price target on the company to $168 from $167.

Price: 145.22, Change: -7.46, Percent Change: -4.89