Long STX at $787.50 · base target $1,125 (+43%) · downside / upside case −36% / +103%. As of the July 17, 2026 close.
- Guidance predates the price surge. FQ4 guidance of $3.45B and $5.00 EPS was issued on April 28. HDD trade prices then rose ~10% quarter on quarter, and are up ~50% since September 2025. Pricing set after April flows almost entirely to gross margin.
- Unprecedented visibility. Nearline exabytes are largely allocated through CY2027, and 2028 is in discussion. Seven hyperscalers have locked in multi-year supply.
- HAMR margin expansion. Non-GAAP gross margin went from 36.2% to 47.0% in four quarters. FQ3 shipped 199 EB, up 39% year on year, and data center revenue was $2.5B, up 55%.
- Kill the trade if management signals flat-to-down $/TB for 2027 contracts, a top-two hyperscaler signals an allocation cut, the September-quarter guide implies gross margin below ~47%, or 2027 contract negotiations slip beyond calendar Q4 2026.