Seagate Technology (STX) could see potential structural re-rating, multiple expansion, and positive earnings per share revisions in the coming months as near-term catalysts for the company build-up, Morgan Stanley said in a Thursday note.

Morgan Stanley's latest industry and supply chain checks confirm that hard disk drive demand continues to outstrip supply, with production lead times remaining elongated at 52 weeks and like-for-like pricing increasing quarter-over-quarter.

In addition, a stronger cloud capex outlook, which has been revised $50 billion higher in the past 1.5 months, further supports HDD demand and reinforces Seagate's revenue growth trajectory, according to the note.

The investment firm expects Seagate to grow revenue, margins, EPS, and free cash flow sequentially through 2025, driving both positive earnings revisions and a valuation re-rating. Another key catalyst is Seagate's May 22 Analyst Day, where Morgan Stanley anticipates the company will issue above-consensus long-term growth and margin guidance.

Despite recent market concerns around DeepSeek, Morgan Stanley believes the market has mispriced Seagate, arguing that greater AI adoption will increase demand for data storage and retention rather than weaken it, further strengthening the HDD cycle.

Morgan Stanley raised its price target on Seagate Technology stock to $138 from $134, with an overweight rating.

Additionally, the firm reiterated Seagate as its Top Pick in IT hardware.

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