Seagate fell more than 9% in one session, dragging its memory-chip peers down with it, as investors backed away from the memory trade. The company reports quarterly results after the close. Wall Street expects adjusted earnings of $5.10 per share and revenue near $3.5 billion.
The stock has dropped sharply from its late-June highs, yet it is still up over 160% year to date (another read puts it above 170%). A year ago it traded at $138. It climbed as high as $1,145, a roughly tenfold gain driven almost entirely by AI demand, then pulled back more than 30% from its all-time high, losing about a third of its value.
The core question
The whole run rests on AI demand. If that excitement cools even a little, stocks that rose this fast become fragile. That fear, plus the sheer price the stock reached, is what is pushing people to take profits.
So the key question going into earnings: is the bar now low because the stock already lost a third of its value, or is it still high, just not as high as before? No clear answer either way. Seagate will almost certainly post strong growth and earnings, but the risk is deceleration. Any hint that growth is slowing could bring more pain. Wedbush stayed a believer, raising its price target to $1,000 from $825 the day before.
The bull-bear read
Memory chips are a commodity that runs in boom-and-bust cycles. Seagate's platform has been growing, with expected EPS growth of nearly 100% and about 40% growth on sales, so it is growing into its earnings. The worry is valuation, whether the stock got over its skis.
One offsetting point: capacity constraints. Seagate can't produce enough to meet current demand, so growth will come but may be stunted. A positive twist is deal length. The company historically gave little guidance and signed deals for no more than six months to a year. Because of the supply-demand squeeze, it now signs deals running three, four, even five years, giving investors more clarity. Still, these are volatile names by history, and after such large 12-month and 6-month gains, anything short of a perfect report could bring more swings.
Two example trades, both built on the 650 strike
The options market prices an expected move of about $85 in either direction, plus or minus. With the stock near $740, that puts roughly $85 below at the 650 line. Both trades below were chosen independently, without discussing them beforehand, yet both landed on the 650 strike because both used the math on the thinkorswim platform to pick strikes. That shared method is the real lesson: pick the direction you like, but let the math guide strike selection.
The bearish-to-neutral trade: a one-week put calendar. Buy the August 7th 650 put and sell the July 31st 650 put, in line with the expected move. It was put on for about $11.30 and now trades under $10, since the stock moved higher. The debit you pay, whether $10 or $11.30, is your total risk. The short July 31st 650 put holds over $15 to $16 of extrinsic premium (time value that decays), all of which disappears by Friday's close if the stock stays above 650. The long August 7th option still has 10 days left, so it loses some value, and a lot more after the volatility crush. You need a move to the downside. The profitable range runs roughly from 730 on the upside to 570 on the downside. What hurts you: the stock rising, or a big outsized drop of $150 to $200. There is also assignment risk on the short 650 put over the next three days. Markets here are wide, not tight, so price discovery matters.
The bullish-to-neutral trade: a short put vertical. More passive, still directional, with better odds of success. In the July 31st weekly options, sell the 650 put and buy the 630 put, a $20-wide spread. It collected about a $5 credit, now trading just over $4 after the stock rose. Max profit is $500 against $1,500 in risk, far more risk than reward, with a break-even at 645. The short 650 put has a 74% chance of finishing out of the money. That means profit in three of four scenarios: the stock rises, stays near 740, or falls but holds above 645.
One trade leans bearish-to-neutral, one bullish-to-neutral, both anchored to 650. You may prefer either, but the takeaway is to use the math for strike selection.
