Seagate Bumps Western Digital on Longbow List

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Seagate Technology (NASDAQ: STX  ) closed yesterday up 5% after Longbow Research added the data storage specialist to its "Best Ideas List," displacing Western Digital (NASDAQ: WDC  ) in the process.

So what: Along with the addition, analyst Joe Wittine planted a price target of $54 per share on Seagate, representing about 25% worth of upside to where it sits now. Wittine's belief that the hard drive industry bottomed in the first half of 2013 naturally bodes well for Western Digital, too, but Seagate gets the spot on the list due to its organic investments (hybrids, enterprise and client SSDs, and services) and attractive valuation.

Now what: Longbow thinks the sector has several trends working in its favor. "The PC-related risk has faded in importance for the HDD stocks, since non-PC HDD sales are now eclipsing PC HDD sales led by double-digit unit growth for enterprise and branded drives," wrote Wittine in a note to clients. "[S]upply/demand fundamentals are attractive with the industry fully consolidated, allowing Seagate and [Western Digital] to defend industry gross margin at 27-32% and allow any future capacity additions to lag demand." Given that both Seagate and Western Digital trade at forward P/E ratios in the single digits, purchasing the pair might even be the prudent way to play those trends.

Editor's note: A previous version of this article had an incorrect price target on Seagate Technology stock. The Fool regrets the error.

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Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On September 26, 2013, at 2:07 PM, HardComeEasyGo wrote:

    I read this Fool article today by Brian Pacampara on STX and he says that Longbow Research set a price target of 81.00 on the stock. I believe, according to Barron's, that this is the WDC price target and that the STX price target is actually 54.00. Here is the text from the Barron's article:

    "Wittine rates both Seagate and Western stocks Buy, with an $81 price target on Western shares and a $54 target on Seagate."

    Please correct me if I'm missing something.

  • Report this Comment On September 27, 2013, at 12:21 PM, TMFKris wrote:

    @HardComeEasyGo: Thank you for your sharp eye. We have corrected that error.

  • Report this Comment On October 21, 2013, at 9:50 PM, monafifi wrote:

    I have this fool over view on he is totally lost track

    the stx closed up yesterday was only 5% an thru price target was %54 per seagate even the representing were about 25% worth i think you fool should go back reading again

  • Report this Comment On October 21, 2013, at 9:59 PM, monafifi wrote:

    Today STX turns out to be $50.49 while the is just +0.45-+0.90% seagate .while wDC turn out to be $72.31caps rating was just+0.55 +0.77%

    That must add up to about 98$ an8% per share

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