Imagine looking at your portfolio after a year when two popular technology stocks have run circles around the S&P 500.
Seagate (STX), best known for hard drives, has gained nearly 142% year to date. Micron (MU), which has blown up due to its AI memory chips, has seen its shares skyrocket by about 240%. Both profited from the tremendous amount of data needed to power AI.
But the celebration has become a lot more complicated.
Seagate has tanked by over 26% in the past month, while Micron has slid roughly 10% as investors question whether the memory and storage boom can continue to deliver extraordinary profits.
Bank of America sees a strong opportunity in the uncertainty.
In an October 28 report shared with me, the bank reiterated its price target for Seagate stock, implying around 80% upside from its most recent closing price. Meanwhile, Micron trades at a much more attractive price-to-earnings multiple based on next year’s projected earnings.
Bank of America sees 80% upside for Seagate despite stock selloff
Bank of America analyst Wamsi Mohan (a 5-star analyst rated by Tipranks) sees a massive buying opportunity in a memory stock that investors have been punishing of late.
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In his October 28 report, shared with me, Mohan reaffirmed a Buy rating on Seagate Technology and set a $1,200 price target, implying nearly 80% upside from the October 27 close, following another earnings stunner.
Seagate’s fiscal Q1 sales surged 61% to $4.23 billion. At the same time, adjusted earnings climbed to $7.68 a share from $2.61 a year earlier, while free cash flow reached a record $1.5 billion.
However, those results didn’t move the needle for the stock. Investors were spooked by the company shipping 220 exabytes of hard-drive capacity, including 198 exabytes of nearline storage used by large data centers, a figure that was less than expected and raises concerns that what has seemed a relentless AI storage boom could potentially be losing momentum.
Mohan sees a different explanation.
Seagate is transitioning to higher-capacity drives using heat-assisted magnetic recording, or HAMR, temporarily disrupting shipments. Management expects volumes to improve in the December quarter. More telling, BofA says nearline production is largely allocated into 2028, while customer visibility stretches beyond 2030.
With storage demand outpacing available supply, Seagate has room to raise prices.
Overall, Mohan forecasts fiscal 2027 revenue of $19.3 billion, up 58%, and adjusted earnings of $37.42 per share, up roughly 140%. He also expects free cash flow to more than double to $6.84 billion.
Moreover, Mohan projects gross margins rising from 46.1% in fiscal 2026 to 61.4% in 2027, despite elevated input costs.
Those are impressive estimates, but for investors, Micron stock has been the more popular trade, and compared with Seagate, its stock looks remarkably cheap on next year’s earnings.
Why Micron stock looks cheaper despite its massive AI rally
Seagate’s projected growth is hard to miss, but Micron offers investors a different way to profit from the same AI boom, and its pricing setup raises an interesting question.
As of October 27, Seagate trades at approximately 17.8 times Bank of America’s projected fiscal 2027 earnings. On the flip side, Micron is trading at just 5.3 times Wall Street’s consensus earnings estimate for fiscal 2027, underscoring a substantial valuation gap.
To be clear, BofA is bullish on both companies. Analyst Vivek Arya (another 5-star rated analyst), in a note shared with me, recently reaffirmed his Buy rating and $1,550 price target for Micron, implying 67% upside compared with nearly 80% for Seagate.
That said, part of the answer to why Micron’s cheaper lies in how expensive it is to run its business.
Micron spent approximately $27.37 billion on capital investments in fiscal 2026, equivalent to 20.6% of revenue. Seagate’s corresponding figure was just $569 million, or 4.7%.
Building advanced memory chips requires enormous investments in manufacturing equipment. Seagate, meanwhile, can benefit from higher hard-drive prices and capacity improvements without the same capital intensity.
That helps explain BofA’s expectation that Seagate’s free cash flow could more than double in fiscal 2027. But Micron’s lower earnings multiple is likely to reflect investors’ concerns that the current unusually strong memory cycle won’t last once additional manufacturing capacity arrives.
A cheap-looking stock isn’t necessarily undervalued if its earnings are near a cyclical peak.
Seagate has greater upside to BofA’s target, while Micron trades at a lower projected earnings multiple. The deciding factor may be which company’s profits hold up better when AI spending eventually slows.
What Seagate and Micron investors should watch in 2027
The next year will test whether investors are witnessing a lasting change in storage economics or another boom that fades when supply catches up.
For Seagate, the evidence will come from shipments. Its transition to higher-capacity HAMR drives needs to lift exabytes sold, while contracted orders through 2028 must become revenue without sacrificing the stronger pricing and gross margins BofA expects.
Micron faces a different test. Strong DRAM and high-bandwidth memory prices must withstand new industry capacity, while cash flow must justify the billions spent on factory expansions.
There’s also a hidden assumption behind Seagate’s $1,200 target.
BofA applies a 16x multiple to its projected calendar 2028 earnings of $75.07 per share. That’s twice Seagate’s historical median multiple of eight times. At that older valuation, the same earnings would support a share price near $601, not $1,200.
That helps frame the choice. Seagate offers relatively capital-light storage growth; Micron offers high-performance memory exposure at a lower forward multiple. For both, the question isn’t how cheap shares look against booming earnings. It’s how much of those earnings will endure.
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