- Seagate (STX +5%) gradually moved higher over the course of the day after Longbow's Joe Wittine decided to put the company on his firm's Best Ideas list at the expense of archrival Western Digital (WDC +1.2%).
- WDC nonetheless saw moderate gains, perhaps in part because much of Wittine's commentary can be viewed as positive for the hard drive industry at-large.
- Wittine reiterates his belief the hard drive industry bottomed in 1H, and points out non-PC drive sales are eclipsing (slumping) PC drive sales thanks to strong enterprise/branded drive growth. He also sees Seagate and WDC's near-duopoly status allowing the companies to maintain a gross margin in the 27%-32% range, and let future capacity additions lag demand.
- He expects Seagate to continue producing $1.9B/year in free cash flow, and praises its valuation of 7.6x estimated FY14 (ends June '14) EPS.
- In spite of the PC industry's woes, both Seagate and WDC have done well this year.
- Earlier: Western Digital CFO leaving for ASML
Seagate rallies after displacing Western Digital on Longbow list
Sep 25 2013, 17:40 ET