Brean Slashes Target On Seagate From $83 To $65 Following Q4 Results, Maintains Buy

In a report published Monday, Brean Capital analyst Ananda Baruah maintained a Buy rating on Seagate Technology PLC (NASDAQ: STX), while lowering his price target from $83 to $65. The company has announced its June quarter EPS ahead of the consensus, driven by better than expected cost control.

The company has responded to the softer PC market by reducing its opex by 20 percent from the March 2015 and March 2016 quarters. In addition, the company believes that it will be able to generate flat revenue for FY2016, at $13.7 billion, driven by a combination of a meaningful increases in blended ASPs despite a decline TAM.

For the June quarter, apart from the EPS beat, the company reported a 5 percent year on year increase in storage shipments, along with impressive opex, better than the estimates, with a 7 percent sequential decline. Gross margin was also slightly ahead of the estimates, although below the guidance, due to a sequential decline in inventory levels.

"[W]e believe this sets up STX well for GM expansion as / if unit ships improve," Baruah said, while mentioning that the company expected to report flat revenue, TAM, margin and opex for the September quarter.

The management has accelerated its share buyback program since the end of June, taking advantage of the share price. Seagate Technology has already completed 5-10 percent of its annual buyback target.

"Management views its longer-term thesis of data growth and the shift to cloud infrastructure as very much intact, with increasing opportunities in data science applications, machine to machine data creation, and massive amounts of unstructured data in the form of video data," the report added.