Seagate Gets Upgrade As Crypto Miners Raise Hard Drive Price

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The “crypto rush” on hard drives has accelerated the improvement in Seagate’s margins, said Tom O’Malley, analyst at Barclays. The time of dreams

The demand for hard drives continues to benefit from the emerging cryptocurrency called Chia.

Creating Chia pieces requires a large disk drive capacity. An increase in hard drive purchases by farmers in Chia has increased demand for high capacity drives and improved the financial outlook for the two major players in the hard drive industry, Seagate Technology (ticker: STX) and Western Digital (WDC) .

On Wednesday, Barclays analyst Tom OMalley raised his rating on Seagate shares on par from underweight, but kept his price target of $ 85, just below the recent level. OMalley said the crypto rush for hard drives has accelerated the improvement in Seagate’s margins. He believes the gross margin could hit the 30% level as early as September, which would be up from 27.4% in the April quarter.

The analyst said the higher average selling prices reflect that Chia is mopping up inventory from low-end channels. And although he noted that Chia was showing cracks, the price of the cryptocurrency fell precipitously, he believes that the rise in demand will lead to more good.

But OMalley added that from there, the main driver should be demand for proximity, high-capacity drives used by cloud customers. He said he sees risks that the margins in this market will be put under pressure by increased competition and any weakness in final demand, and noted that average selling prices near the line have been falling for three quarters. consecutive.

Nonetheless, OMalley raised its estimate of Seagates earnings per share for the June quarter, September quarter. and calendar years 2021 and 2022. It also increased its estimates on Western Digital to reflect both higher gross margins in the disk drive industry and a growing market for NAND flash memory products. It maintained its Equal Weight rating and its target price of $ 85 on Western Digital stocks.

At midday, Seagate was down 0.4% to $ 87.31, while Western Digital is up 0.1%, to $ 70.73.

Write to Eric J. Savitz at [email protected]

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