Seagate Technology, Western Digital: Brean Capital Sees Buying Opportunity In Stock Pullback

Seagate Technology PLC STX is down more than 7 percent on Monday, while Western Digital Corp WDC fell about 5 percent.

Following this pullback, Brean Capital’s Managing Director Ananda Baruah and Research Associate David Ryzhik recommended buying both these stocks, “as the structural positives from STX’s call outweigh temporary negatives,” and they continue to believe that “WDC can potentially deliver EPS upside of at least $0.05 to Dec Q and Mar Q Street EPS of $2.10 & $1.99; and […] importantly note that WDC should not have the same dynamic of greater-than-expected Opex $s in the Mar Q that is hurting STX today as STX is refreshing its product line.”

Related Link: Brean Capital Recaps Seagate Technology's Earnings

The analysts reiterated their bullish view on both these companies, maintaining an $83 price target for Seagate, and a $150 price target for Western Digital, as their “core thesis of secular GM expansion (ex-integration costs) and ongoing multiple expansion continues to play out.” They ultimately believe that Seagate could trade to $100 (reflecting a ~14x EV/FCF; 15x normalized EPS of $6.50), and Western Digital, to $170 (reflecting a ~14x EV/FCF; 15x normalized post-MOFCOM EPS of ~$11.00).