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

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Analyst Busts Seagate-XRP Play, Advises To Sell On The Strength
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Seagate Technology PLC (NASDAQ: 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.

Seagate spokesperson Jenny Myers told Benzinga in an emailed statement Tuesday, "Seagate is an investor in Ripple. However, I cannot confirm the company's percentage stake in Ripple at this time."

Price Action

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

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Latest Ratings for STX

DateFirmActionFromTo
Apr 2018Morgan StanleyUpgradesEqual-WeightOverweight
Mar 2018BarclaysMaintainsUnderweightUnderweight
Mar 2018Loop CapitalMaintainsBuyBuy

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View the Latest Analyst Ratings

Posted-In: Blockchain Mehdi Hosseini ripple Ripple LabsAnalyst Color Top Stories Analyst Ratings Trading Ideas Best of Benzinga

 

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