- Brean's Ananda Baruah has raised his Seagate (STX +4.1%) PT to $70 from $55, and his Western Digital (WDC +0.9%) PT to $125 from $85, while reiterating Buys for both names. The PT hikes come shortly after the hard drive giants respectively received upgrades to Overweight and Buy from JPMorgan and Citi.
- With industry consolidation keeping pricing healthy, Baruah thinks Seagate/Western can deliver 100-200 bps of gross margin improvement over the next few years, and perhaps 400-500 of improvement within 5-7 years.
- That, in turn, leads him to forecast Seagate and Western willrespectively deliver $7+ and $8.64 in calendar 2015 EPS. He add cost savings obtained from integrating Hitachi's hard drive unit could boost Western's EPS by another ~$1.70. For reference, Seagate's current FY15 (ends June '15) EPS consensus is at $5.96, and Western's is at $8.59.
- Seagate has made new 52-week highs, and Western is close to its 52-week high of $84.70.