Seagate Is The Lower Cost Way To Play The Cloud Trend, BTIG Says

Seagate Technology PLC STX shares are down almost 30 percent year-to-date. BTIG’s Edward Parker initiated coverage of the company with a Buy rating and a price target of $30, saying that there is “there is more specific demand for cloud optimized products than ever, which bodes well for pricing in an industry that has become rational.”

Analyst Edward Parker commented that the best way to take advantage from growth in cloud storage is by owning disk drive stocks.

“It seems counterintuitive, but we believe this generational shift in computing will unlock profit pools that have been previously unavailable to the drive makers while providing opportunity for them to add value in ways not possible under the PC OEM dominated industry structure,” Parker wrote.

Improving Trends

Although PC weakness continues, it would benefit to own drives that are “destined to the cloud operators,” where significant growth is expected over the next several years, the analyst said. Most importantly, there is upside to ASPs due to mix as well as higher value-add drives.

The analyst mentioned the other positives as robust FCF generation and generous capital return. He added, “We believe Seagate is the lower risk way to play the cloud trend.”