RBC Capital Raises Price Target on Seagate Technology (STX) Following June Pre-announcement
RBC Capital reiterated a Sector Perform rating on Seagate Technology (NASDAQ: STX), and raised the price target to $27.00 (from $24.00), following the company's positive June pre-announcement. Seagate anticipates revenue of $2.65B, non-GAAP gross margins of 25.8% on 37M units vs. previous guidance of $2.3B revenue and 22.7% gross margin. RBC estimates the implied EPS is $0.60 (vs. Street at $0.13).
Analyst Amit Daryanan commented, "After market close, Seagate positively preannounced June-qtr to $2.65B revenue and 25.8% non-GAAP gross margin, on 37M units. Impressively, STX noted that ASP’s came in at $67 (+11% q/q and +12% y/y) and total storage capacity shipped was 62EB (+11.5% q/q). We think mix was rather favorable and enabled material gross-margin upside of ~300bps to 25.8% in June-qtr; this reflects uptick in 8TB share coupled with better execution across the board and limited presence in the low-end notebook market. In addition, STX expanded on their cost take out program and expects headcount reduction of 6,500 employees (14% of total headcount) by end of FY17. We suspect these take out actions will enable STX to achieve their target of “at least $2.50 EPS” in CY17. Maintain SP but adjusting our target to $27 from $24."
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Shares of Seagate Technology closed at $24.09 yesterday.