Auriga Maintains a 'Buy' on Seagate Technology (STX); Valuation Attractive N-T, and Much More Attractive with Post-Merger Benefits

Auriga maintains a 'Buy' on Seagate Technology (NASDAQ: STX), PT $30.

Auriga analyst says, "Seagate reported strong F4Q11 (June) results, but disclosed that they are being negatively impacted by product transition issues and soaring prices of rare earth elements, both of which will offset the higher pricing that we noted in our recent estimate increase, and thus guidance was somewhat disappointing. Longer term, we expect Seagate will be the big winner from ongoing industry consolidation, and believe investors continue to underestimate Seagate's free cash flow potential post merger."

"With a 200bp negative impact from materials pricing, and an additional 100-150bp hit due to poor yields both likely to persist into the December quarter, we are partially backing off our recent estimate increase, but we remain above company guidance of $2.9Bn in revenue and $0.29-$0.33 EPS ($0.32-$0.36 excluding options) for F1Q12 (September), at $2.98Bn in revenue and pro-forma EPS of $0.40 (versus prior estimates of $2.93Bn and $0.50)."

For more ratings news on Seagate Technology click here and for the rating history of Seagate Technology click here.

Shares of Seagate Technology closed at $16.93 yesterday.

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