Analyst Busts Seagate-XRP Play, Advises To Sell On The Strength

Seagate Technology PLC STX rallied Monday on a Seeking Alpha post that it could own $7.8 billion in Ripple, the majority owner of XRP. But the ostensible cryptocurrency play may not be as profitable as it appears.

The Rating

Susquehanna Financial Group analyst Mehdi Hosseini maintained a Neutral rating on Seagate with a $39 price target.

The Thesis

For one, the figures presented in the original report are highly speculative.

According to author ValueStreet Research, Seagate had invested in Ripple’s Series A and B funding rounds, which suggests about 4.3-percent ownership of the firm, which itself owns 61 percent of then-$3 XRP. These base figures suggest Seagate owns about $7.8 billion in Ripple.

But Susquehanna anticipates Seagate owns between 2 and 4 percent of Ripple valued between $2.5 billion and $5 billion.

Additionally, this investment in Ripple is not a direct investment in the XRP cryptocurrency, but is an investment in Ripple Labs.

“STX's investment in Ripple Labs is intriguing, but we do not view this as a material upside driver given that it is an equity investment (not token ownership) and as such, is not a source of liquid cash,” Hosseini wrote in a note.

He advised selling Seagate on Monday's Ripple-related strength and waiting for announcements from Seagate on its use of blockchain technology.

Price Action

At time of publication, shares were trading up 7.2 percent at $46.04.

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