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Seagate's (STX) PT Raised to $50 at FBN, Analyst Maintains Sector Perform Rating

July 31, 2015 2:40 PM EDT
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Price: $94.58 --0%

Rating Summary:
    17 Buy, 27 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 12 | Down: 10 | New: 10
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FBN Securities maintained a Sector Perform rating on Seagate Technology (NASDAQ: STX) but raised its price target to $55.00 (from $50.00). Comments follow Q4 results. Analyst Shebly Seyrafi noted the company gained share and is reducing opex, but he continues to see the stock as fairly valued.

"Although STX expects FQ1 revenue of $2.9-$3.1B, which is below consensus, it expects its quarterly expense rate in FQ1/Sept. to be flat with FQ4’s $515M level and to decline to “comfortably” below $500M per quarter exiting F2016. This is expected to result in total opex declining by at least 10% Y/Y for F2016, and this is expected to result in NG EPS growth of at least 10% Y/Y in F2016. This is great news if STX delivers," said Seyrafi.

"Our concern is that the company has now created a high bar as the ability to achieve top-line targets while cutting opex by ~10% could be challenging. STX is guiding for FQ1 revenue to be $2.9-$3.1B, down 18-23% Y/Y and below consensus of $3.2B, and it expects a relatively flat environment for FQ1 even though W10 started to become available on July 29 (however Intel’s Skylake appears to have been delayed until the end of CQ3)," added the analyst. "With STX’s shares now trading at an EV/revenue ratio of 1.3x (higher than WDC’s 1.2x) and at a P/E (C2016) of ~10x, we see no more than 10% upside in STX’s shares currently."

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 $51.29 yesterday.



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Shebly Seyrafi