Seagate Technology (NASDAQ: STX) is a rare cloud-computing company that makes money. Seagate profits from the cloud with storage systems companies can use to host the cloud.
For instance, Seagate (STX) reported a quarterly gross profit of $696 million and a quarterly operating income of $348 million on 31 December 2020. Additionally, Seagate reported quarterly revenues of $2.623 billion on 31 December 2020.
On the other hand, Seagate’s revenues, income, and gross profit shrank in 2020. For example, Seagate reported a quarterly gross profit of $758 million and a quarterly operating income of $384 million on 31 December 2019. Plus, Seagate’s quarterly revenues fell from $2.718 billion on 31 December 2019.
I think coronavirus is hurting Seagate. Notably, Stockrow estimates Seagate’s revenue growth shrank by -2.71% in the quarter ending on 31 December 2020. The revenue growth shrank by -10.24% in the quarter ending on 30 September 2020.
How Seagate Makes money in the Cloud
Seagate Technology (STX) profits from the cloud with hyperscale architecture and private cloud solutions.
To elaborate, Seagate builds storage solutions that allow companies to host a private cloud in their own systems. That way, a company can allow employees to work from home without outsourcing the cloud to a third- party.
Seagate’s technology allows a company to store sensitive or proprietary data, yet makes it available in a private cloud. Seagate teams up with software providers such as IBM’s Red Hat Data Services to help customers build private clouds.
Other uses for Seagate’s technology include backup & recovery, Big Data Analytics for Artificial Intelligence and Machine Learning, Video Surveillance, and High Performance Computing. The industries Seagate serves include autonomous vehicles, Media & Entertainment, Telecommunications, Healthcare, and Surveillance and Security.
How Much Cash Does Seagate Technology Generate?
I think Seagate (STX) generates an excellent cash flow. For instance, Seagate reported a quarterly operating cash flow of $473 million on 31 December 2020. The quarterly operating cash flow fell slightly from $480 million on 31 December 2019.
Additionally, Seagate reported a quarterly ending cash flow of $135 million on 31 December 2020. The quarterly ending cash flow rose from -$40 million on 31 December 2019, but fell from $1.666 billion on 30 September 2020.
Interestingly, I think Seagate is paying its debts because Seagate reported negative four quarters of negative financing cash flow in 2020. For instance, Seagate reported a quarterly financing cash flow of -$179 million on 31 December 2020. Conversely, Seagate’s long-term debt rose from $4.135 billion on 31 December 2019 to $5.12 billion on 31 December 2020.
What Values Does Seagate Technology Have?
Seagate had some value in $1.799 billion in cash and short-term investments on 31 December 2020. Seagate also had $8.896 billion in total assets on the same day.
Seagate gained some value in 2020. For instance, the total assets rose from $8.932 billion on 31 December 2019. Additionally, the cash and short-term investments rose from $1.744 billion on 31 December 2019.
I think Mr. Market fairly priced Seagate Technology (STX) at $71.72 on 27 January 2021. Thus, Seagate is cheaper than other cloud computing stocks and it makes money.
Appealingly, Seagate pays an impressive dividend. For example, Seagate will pay a 67¢ quarterly dividend on 23 March 2021. In 2020, that dividend rose from 65¢ on 22 September. Overall, Seagate offered a forward annualized dividend of $2.68 and a foreword dividend yield of 4.38% on 27 January 2020.
In the final analysis, I do not find Seagate appealing. However, I advise people who are seeking a cheap cloud stock that pays a dividend to investigate Seagate.