Flash Memory Won't Necessarily Kill The Hard Drive Market For Seagate

Focus On Data Growth

Analyst Edward Parker suggested that investors should move away from forecasting units and begin to focus on broader data growth. Even if the data growth points towards below-historical trends, the analyst believes the annual demand for HDD storage in the Zettabyte range by 2020. Zettabyte is a unit of information amounting to 2 to the power of 70 bytes.

Memory May Grow, But Insufficiently

Although BTIG believes memory may continue to represent a growing proportion of bits shipped, it is of the view that there isn't enough production capacity available to meet the demand for storage bit.

Related Link: Vetr Crowd Divided Over Seagate, Still Says "Buy"

Based on this estimate, BTIG sees Seagate Technology PLC STX's HDD revenues to come in at an annual run rate of $9 billion. The firm sees further upside if data growth rates normalize, latent pricing power is exercised or Toshiba Corp (USA) TOSYY surrenders shares.

Raising Estimates, Price Target

The firm estimates 2019 earnings per share of $4 to $6 per share and 2020 earnings per share of $5 to $7, going by its estimate of zettabyte. Accordingly, the firm raised its price target to $45 from$36, which is 13 times its 2018 earnings per share estimate.

However, the firm cautioned that the valuation is at the high end of the price-earnings multiples applied to HDD stocks. Nevertheless, the firm is convinced of it, given the long-term earnings power of the model. The firm has a Buy rating on Seagate.

In pre-marketing trading, the shares of the company were down 1.40 percent at $38.54. At last check, Seagate was down 2.17 percent at $37.70.

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