Wells Fargo Upgrades Seagate and Raises Price Targets for Two Storage Stocks
Miles Bennett
Wells Fargo upgraded Seagate to overweight with a $1,100 target and raised Western Digital's target to $730, betting that AI-driven nearline HDD demand will accelerate for years and stretch earnings visibility for both companies.
What exactly changed in the ratings?
Seagate was upgraded from equal-weight to overweight; target raised from $900 to $1,100, a roughly 22% increase.
Western Digital stays at overweight; target raised from $575 to $730, up about 27%.
Analyst Aaron Rakers' team expects both companies' fiscal Q4 2026 results to reinforce the market's confidence in the industry's long-term growth trajectory.
What is the growth logic for nearline HDDs?
Nearline HDDs — high-capacity drives built specifically for data-center-scale storage — are expected to sustain 25%+ annual capacity shipment growth long-term, potentially rising above 30% if supply discipline holds.
This means → the ever-expanding data volumes inside AI data centers are becoming the most reliable growth engine the HDD industry has.
On pricing, blended average selling prices are projected to grow at mid-to-high single digits year-over-year, with gains widening to low-to-mid double digits in 2027–2028.
How high can gross margins go?
Wells Fargo expects gross margins to keep climbing past 65%, with a bull case above 70%.
In plain terms = unit prices are rising while supply discipline caps output — margin expansion has room to run on both sides.
This reflects a structural shift in the storage industry: from cyclical price wars to sustained volume-and-price gains.
How far out does customer visibility extend?
Procurement agreements with major global cloud providers remain solid, with joint planning now stretching to 2030.
Nearline HDD capacity is largely allocated through 2027, and 2028 demand planning has begun.
This means → revenue for the next two to three years is not a forecast — it is backed by actual contracts, giving the storage sector an unusually long earnings line of sight.
What does the valuation depend on?
Seagate's $1,100 target implies roughly 20× estimated 2028 earnings; the key assumption is that nearline shipments and margins track the projected path.
The fiscal Q4 2026 report is the first critical checkpoint — the market will watch shipment and pricing data closely for confirmation of the long-term thesis.
Wells Fargo also sees strong free cash flow providing ample room for capital returns. Put simply = the companies can expand capacity and reward shareholders at the same time.
Content is for reference only, not financial advice.