Seagate (STX) Could Pre-Announce Positively Again, RBC Says; PT to $40

October 3, 2016 7:02 AM EDT
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Price: $36.47 +0.36%

Rating Summary:
    8 Buy, 26 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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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)."

For an analyst ratings summary and ratings history on Seagate Technology click here. For more ratings news on Seagate Technology click here.

Shares of Seagate Technology closed at $38.55 yesterday.

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