Why Seagate Technology PLC Will Keep Soaring in 2014

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 PLC (NASDAQ: STX  ) climbed slightly on Tuesday after Morgan Stanley upgraded the hard disk drive technologist from Equal weight to Overweight.

So what: Along with the upgrade, analyst Katy Huberty planted a price target of $72 on the stock, representing about 18% worth of upside to Friday's close. While value investors might be turned off by the stock's surge since the summer, Huberty believes there's plenty of room to run given his view that Seagate's recent operating momentum is only getting stronger.

Now what: Morgan expects Seagate's margins to continue to expand on improving volumes and a more favorable product mix. "We model 20 bps of gross margin expansion in FY15 to 28.7%, as enterprise/cloud mix is partially offset by the lower margin Xyratex business in the near-term," noted Huberty. "Industry consolidation and stable fundamentals expand the P/E multiple to the low-end of similarly consolidated industries (CPUs and HBAs)." Of course, when you couple the stock's red-hot price action (up nearly 110% from its 52-week lows) with its extremely volatile nature (beta of over 3), conservative investors might want to maintain their distance.

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