Seagate (STX) Could Pre-Announce Positively Again, RBC Says; PT to $40
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RBC Capital analyst Amit Daryanani sees three reasons Seagate Technology (NASDAQ: STX) could issue another positive pre-announcement and bumped its price target to $40.00 (from $34.00) while maintaining a Sector Perform rating.
The firm's checks suggest:
1) TAM is likely close to 110M if not modestly higher (+12% q/q) vs. STX guide for revenues to be up ~4%, we sense STX benefited from gaming upside (1TB HDD vs. low-end shipments),
2) Hyperscale demand remained robust and STX continued to see share gain on 8TB (though less vs. LQ). Fundamental trends that enabled strong performance in Jun-qtr remained intact through Sept-qtr,
3) Mission Critical: given “less bad” reports from enterprise storage vendors, mission-critical drives were down less vs. expected.
"We think STX could end-up seeing revenues >$2.85B and EPS in the $0.90+ range (assuming good operational execution), and this should enable the stock to work towards $40+," the analyst said. "The big upside we suspect will be strong gross-margins vs. 27% guide (100-150bps upside potential)."
Shares of Seagate Technology closed at $38.55 yesterday.
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