Rosenblatt Says Buy Seagate And Hold Western Digital

While Seagate Technology PLC STX and Western Digital Corp WDC combine to dominate the hard disk drive (HDD) market, the former company leads in mass capacity HDD by six months to a year, according to Rosenblatt Securities.

The Analyst: Rosenblatt’s Kevin Cassidy initiated coverage of Seagate with a Buy rating and a price target of $65. The analyst also launched coverage of Western Digital with a Hold rating and a price target of $53.

The Thesis: The massive growth of data is driving the demand for storage media and HDD is expected to remain the lower cost option, Cassidy said in the note.

Seagate has a lead in mass capacity drives and could gain profitable market share in data centers, the analyst mentioned. He added that the company has a pipeline of mass capacity drive launches planned through 2026.

Referring to Western Digital, Cassidy said it has lagged slightly in terms of unit prices and market share.

While Seagate’s first-to-market advantage is likely to result in market share gains and accelerated revenue and earnings, Western Digital’s acquisition of SanDisk Corp in 2016 has added volatility to revenue, earnings and share price valuations.

“Given recent COVID-19 related economic uncertainties, we prefer the more consistent and predictable Seagate earnings," Cassidy wrote in the note.