Brean: Seagate And Western Digital 'Remain Very Attractive'

In a report published Monday, Brean Capital analysts maintained a Buy rating on both Western Digital Corp (NASDAQ: WDC) and Seagate Technology Public Limited Company (NASDAQ: STX). The price target for Western Digital is set to $150, while that for Seagate is at $83.The analysts consider both the companies as their "favorite secular longs," despite a number of "nuances" introduced during the March quarter, including significantly softer-than-anticipated PC Notebook demand and Enterprise Drive ASP declines. In the report Brean Capital noted, "Even assuming a return to mid-single digit Y/Y TAM declines, WDC normalized EPS is at least $7.50 - $8.00 BEFORE realizing a MOFCOM benefit of $1.50 - $4.00 (or a MOFCOM adjusted EPS of $9.00 - $12.00) and STX normalized EPS is $5.25 - $5.50 WITHOUT assuming incremental success from its Enterprise Systems strategy, which could add $0.50 - $1.50 to normalized EPS, or $5.75 - $7.00." For Western Digital, the revenue and EPS estimates for the March quarter have been reduced from $3.79B to $3.59B and from $2.10 to $1.87, respectively. The revenue and EPS estimates for 2015 have been reduced from $15.7B to $14.9B and from $9.15 to $8.13 and for 2016 from $15.7B to $14B and from $9.33 to $7.39. For Seagate, the revenue and EPS estimates for the March quarter have been reduced from $3.45B to $3.3B and from $1.04 to $0.95, respectively. The revenue and EPS estimates for 2015 have been reduced from $14.4B to $13.8B and from $5.00 to $4.59 and for 2016 from $14.4B to $13.3B and from $5.73 to $5.23."Guidance was in the 130M – 135M range, although the TAM was always going to be very weighted to the month of March given a late Chinese NY. The anticipated Mar Q TAM miss is being driven almost exclusively by much softer-than-anticipated PC Notebooks, which we believe were down at least 10M units Q/Q vs. expectations," the analysts added.