Seagate Technology Holdings plcSTXNASDAQ

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Revenue projections show 15% decline from peak. Analyst estimates may reflect secular headwinds or transition period.

DCF Valuation Summary

Strong Sell

Fair Value: $203.62 per share(market-calibrated)

-46.3%

Upside to Fair Value

Current

$379.52

Pure Model

$144.98

Fair Value

$203.62

Bull Case

$184.24

Bear Case

$105.91

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor STX

✓

CapEx already efficient

CapEx at 3.77% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 12.15% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $3.0B (20.79% margin).

⚠

Analyst growth decelerates sharply

Revenue growth drops from 26.73% in Year 1 to -14.99% by Year 5 (per analyst consensus). That's below the 3.75% terminal rate, so growth re-accelerates in Years 6-10 — a generous assumption. This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $96.41/share (13.5x terminal FCF) while exit multiple gives $193.56/share (34.9x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $379.52. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 80.28% indicates efficient cash generation. FCF reaches $2.8B by Year 10 (20.00% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.64

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.86%

Cost of Debt

Pre-tax Cost of Debt5.34%

Tax Rate5.00%

After-tax Cost of Debt5.07%

Equity Weight (E/V)93.74%

Debt Weight (D/V)6.26%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (93.74% × 11.86%) + (6.26% × 5.07%)

= 11.43%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$11.5B	$16.8B	$17.3B	$14.2B	$14.2B
EBIT	$1.4B	$2.0B	$2.1B	$2.4B	$3.0B
Tax	$70M	$102M	$105M	$119M	$148M
NOPAT	$1.3B	$1.9B	$2.0B	$2.3B	$2.8B
+ Depreciation	$475M	$691M	$715M	$587M	$587M
- Capex	$434M	$631M	$654M	$537M	$536M
- Δ NWC	$71M	$67M	-$90M	-$34M	$15M
Free Cash Flow	$1.3B	$1.9B	$2.2B	$2.4B	$2.8B
Discount Factor	0.897	0.723	0.582	0.469	0.339
Present Value	$1.2B	$1.4B	$1.3B	$1.1B	$964M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.8B

Terminal Growth Rate3.75%

WACC11.43%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$38.4B

PV of Terminal Value$13.0B

Exit Multiple Method

Year 10 EBITDA$3.5B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$99.2B

PV of Terminal Value$33.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.9B

PV of Terminal Value$13.0B

Enterprise Value$24.9B

(-) Net Debt$4.5B

Equity Value$20.4B

Shares Outstanding212M

Price per Share$96.41

Exit Multiple Method

PV of Projected FCFs$11.9B

PV of Terminal Value$33.6B

Enterprise Value$45.5B

(-) Net Debt$4.5B

Equity Value$41.0B

Shares Outstanding212M

Price per Share$193.56

Pure Model Fair Value

$144.98

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
9.43%	$177.53	$181.14	$185.38	$190.44	$196.58
10.43%	$157.75	$160.23	$163.09	$166.42	$170.33
11.43%	$141.19	$142.97	$144.98	$147.28	$149.92
12.43%	$127.04	$128.36	$129.82	$131.47	$133.33
13.43%	$114.78	$115.77	$116.86	$118.07	$119.43

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$105.91

-72.1% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.04

Base Case

$144.98

-61.8% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.64

Bull Case

$184.24

-51.5% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.39

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth26.73%

Year 3 Revenue Growth15.77%

Year 5 Revenue Growth-14.99%

Year 7 Revenue Growth-7.49%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin12.15%

Terminal EBIT Margin25.00%

Tax Rate5.00%

Historical Capex / Rev3.77%

NWC / Revenue2.94%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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