Needham Upgrades Seagate Technology PLC; Cites Enterprise, Cloud Segments

Seagate Technology PLC's STX share price will rise sharply on unexpected demand from its enterprise and cloud computing segments, an analyst said Monday. The disk-drive maker is off about 18 percent in the year to date but changed hands recently at $54.45, up $0.69 cents. Needham's Richard Kugle upgraded Seagate to Strong Buy, from Buy, while maintaining a $65 target. Although demand for Seagate products related to personal computers continues to disappoint, Kugle said the company's enterprise and cloud-related products are doing better than expected. Prices for the stronger categories are higher than PC products, leading to profit margins that will meet or exceed expectations, Kugle said. Kugle left intact his fiscal 2015 earnings estimate of $4.83 a share. But he cut his revenue estimate by nearly 2 percent to $14.22 billion, offset by a higher estimated operating margin. Analysts on average expect earnings for the year ending June 30 of $4.89 a share, on revenue of $14.41 billion. The stock's recent reaction to a weakened PC market "has been excessive," Kugle said. "We think the consensus is impacted by poor arithmetic."