Seagate Technology (STX) PT Raised to $50 at Brean Capital; Ahead of Schedule on $5 EPS
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Brean Capital analyst Ananda Baruah reiterated a Buy rating and boosted his price target on Seagate Technology (NASDAQ: STX) to $50.00 (from $42.00) after the company pre-announced better-than-expected results. The firm sees the company ahead of schedule and driving to delivering $5.00 in normalized EPS. In addition, while they're using a 10x P/E, they continue to believe that given STX FCF generation and duopoly characteristics, once the model proves it can again stabilize, STX can again trade at 12x - 14x (which over time places the stock at >$60).
Baruah believes that Street continues to under-appreciate:
1) the degree to which STX can adjust its Cap U / COGS model (we believe STX could exit Jun Q '17 at 90% - 95% Cap U;
2) the degree to which ASPs could increase in CY17 & CY18 from mix (we believe mid-single digit potential);
3) that STX has ~$160M in annual incentive comp in its FY17 Opex run rate which should "normalize" as it gets into the Sep '17 Q, impacting each Q by ~$40M.
Shares of Seagate Technology closed at $35.10 yesterday.
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