Seagate Technology Holdings plcSTXNASDAQ

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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: $198.05 per share(market-calibrated)

-44.8%

Upside to Fair Value

Current

$358.82

Pure Model

$144.46

Fair Value

$198.05

Bull Case

$183.61

Bear Case

$105.47

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 $95.90/share (13.4x terminal FCF) while exit multiple gives $193.02/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 $358.82. 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)1.65

Market Risk Premium4.50%

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

Cost of Equity (Re)11.92%

Cost of Debt

Pre-tax Cost of Debt5.34%

Tax Rate5.00%

After-tax Cost of Debt5.07%

Equity Weight (E/V)93.40%

Debt Weight (D/V)6.60%

WACC Calculation

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

WACC = (93.40% × 11.92%) + (6.60% × 5.07%)

= 11.46%

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	0.722	0.581	0.468	0.338
Present Value	$1.2B	$1.4B	$1.3B	$1.1B	$961M

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%

WACC11.46%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$38.3B

PV of Terminal Value$12.9B

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$33.5B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.9B

PV of Terminal Value$12.9B

Enterprise Value$24.8B

(-) Net Debt$4.5B

Equity Value$20.3B

Shares Outstanding212M

Price per Share$95.90

Exit Multiple Method

PV of Projected FCFs$11.9B

PV of Terminal Value$33.5B

Enterprise Value$45.4B

(-) Net Debt$4.5B

Equity Value$40.9B

Shares Outstanding212M

Price per Share$193.02

Pure Model Fair Value

$144.46

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%
9.46%	$176.84	$180.41	$184.59	$189.58	$195.63
10.46%	$157.18	$159.64	$162.46	$165.75	$169.60
11.46%	$140.71	$142.47	$144.46	$146.73	$149.34
12.46%	$126.63	$127.93	$129.38	$131.01	$132.85
13.46%	$114.41	$115.40	$116.48	$117.68	$119.02

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

$105.47

-70.6% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 2.06

Base Case

$144.46

-59.7% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.65

Bull Case

$183.61

-48.8% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 1.40

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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