JPMorgan on Monday started coverage of Seagate Technology with an Overweight designation and a year-end price target of $525, saying the HDD maker’s shares still have room to run despite a roughly 350% gain since early 2025. Over the same period, the S&P 500 rose about 11%.
The bank derived its $525 target by applying a 22x multiple to a 2027 earnings-per-share (EPS) estimate of $23.45. That calculation implies roughly 39% upside from Seagate’s closing price on Friday.
In a note, analysts led by Samik Chatterjee wrote: "Our financial forecasts imply upside to CY27 consensus estimates, with further opportunity for upside from a stronger pricing than the stable to modest increases embedded in our forecasts, as well as upside to the target valuation multiple on lower concerns around the sustainability of the capex cycle."
JPMorgan characterized its valuation stance as conservative relative to an average multiple of about 25x applied to AI-levered suppliers, and said additional upside could emerge if cloud spending visibility improves or if actual pricing turns out stronger than its base assumptions.
The bank’s constructive view rests on two central pillars. First, hyperscaler AI infrastructure investment is expected to drive a sharp increase in storage demand. Second, the analysts see a structurally improved pricing environment for hard-disk drives compared with what the industry has experienced in recent years.
Specifically, JPMorgan projects storage exabyte growth in the mid-20% range annually, up from a historical low-teens rate, driven by AI workloads that push datacenter storage needs materially higher. The firm forecasts a 25% revenue compound annual growth rate and a greater than 50% operating earnings CAGR over the medium term, metrics it says justify a re-rating of Seagate shares.
A notable element of the thesis is the concentrated market structure in HDDs. Seagate and Western Digital together account for roughly 80% to 90% of industry supply, and both companies have signaled intentions to expand capacity through higher-density drives rather than increasing unit shipments. JPMorgan said this approach should help preserve pricing discipline and support margin expansion.
On margins, the bank expects gross margins to expand to about 50% by the end of 2027, versus a historical band of roughly 25% to 30%.
Seagate’s transition to heat-assisted magnetic recording, or HAMR, is cited as another upside catalyst. The company has qualified its Mozaic 4 platform - which can deliver approximately 40 terabytes per drive - with a second customer. JPMorgan expects faster-than-anticipated HAMR adoption will support higher exabyte growth versus current targets.
JPMorgan also outlined the primary risks to its thesis. Those include a slowdown in cloud capital spending that would reduce hyperscaler orders, potential capacity constraints that could limit supply-side flexibility, and a quicker-than-expected customer shift toward flash-based storage should NAND prices moderate.
The research note also referenced broader market conversation about peer exposure. A third-party AI stock selection tool mentioned in the note evaluates Western Digital alongside many other companies monthly, assessing fundamentals, momentum and valuation across more than 100 metrics. That section of the note described the tool’s aim to identify stocks with attractive risk-reward profiles but did not change the firm-level views presented in the coverage initiation.
Takeaway - JPMorgan’s initiation frames Seagate as an AI-era beneficiary with a valuation underpinned by above-trend exabyte growth, structural pricing improvement and HAMR adoption, but the outlook depends on cloud capex and the pace of broader storage technology shifts.