Western Digital Better Bet Than Seagate, JPMorgan Says - Seagate Tech Hldgs (NASDAQ:STX), Western Digital (NASDAQ:WDC)

In a report published Thursday, analysts at JP Morgan initiated coverage of

Seagate Technology PLC,/b> STX with a Neutral rating and Western Digital Corp WDC with an Overweight rating. The price target for Seagate is set to $57, while that for Western Digital is set to $105. US PC shipments fell in 1Q, following four straight quarters of growth, according to figures released by Gartner. EMEA and APAC PC shipments also declined Y/Y during the quarter. The decline in shipments was due to weakening of enterprise desktops, with the fading of the Windows XP replacement cycle. "We like WDC's more diverse portfolio which includes flash. In addition, a potential approval from MOFCOM to lift the hold-separate condition for HGST could unlock an incremental ~$400m in annual opex synergies (~$1.60 of EPS) in addition to material COGS synergies," the analysts said. According to JP Morgan, Western Digital's shares deserve to trade at a premium to the company's PE multiple, as compared to Seagate, given the former's larger cash reserves. However, the analysts prefer to take a cautious stance for the medium term, given the continuing weakness in PCs.

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