- After starting the day nearly flat, Seagate (NASDAQ:STX) has rallied above $30 on its second trading day after posting an FQ2 beat and issuing (to little surprise) light FQ3 guidance. Possibly helping: Benchmark has upgraded Seagate to Hold, albeit while cutting its target by $3 to $32.
- Deutsche's Sherri Scribner has cut her target by $5 to $35, while reiterating a Buy. She praises dividend yield (currently 8.7%), considers guidance better than feared, and notes a mix shift towards enterprise hard drives - enterprise units rose 4% Q/Q in FQ2 - is a positive for sales and gross margin. "From here, STX needs to deliver on goals to return to GM targets of 27-32% in F4Q-16, show continued OpEx discipline, continue to grow non-HDD revenue, and return to Y/Y Exabyte growth. We believe these goals should be attainable."
- FBN's Shebly Seyrafi (Sector Perform, target cut to $35) offered a mixed reaction. "[The hard drive addressable market] turned out to be ~115M units (down 18% Y/Y) in CQ4 2015, and we estimate that the TAM will decline further to 103M units (down 18% Y/Y) in CQ1 2015 ... A key positive in the STX report is that it apparently gained ~2pp of share Q/Q in enterprise HDDs with enterprise Exabyte shipments up 21% Q/Q ... We would like to see more stabilization in the company’s top-line growth on a Y/Y basis before possibly getting more positive on the stock."
- Seagate is now up 15% from Thursday's close. Shares go for 8x an FY17 (ends June '17) EPS consensus of $3.85 (down from $4.45 90 days ago). The company had $2.9B (over $9/share) in net debt at the end of FQ2.