UPDATE: Longbow Research Reiterates on Seagate Technology on Good Market Position

In a report published Wednesday, Longbow Research analyst Joe Wittine reiterated a Buy rating on Seagate Technology (NASDAQ: STX), and raised the price target from $54.00 to $58.00.

In the report, Longbow Research noted, “We continue to rate the shares of STX as BUY, with a revised 12-month target price of $58 (previously $54), or less than 10x our FY15 EPS forecast of $5.85. While short-term STX is being selective and conceding some market share, the company is well-positioned to outgrow the HDD market in CY14 driven by organic investments in hybrids, enterprise client SSDs, and services; and growing exposure to 4TB enterprise and 2TB branded drives. Second, we continue to believe sales for the overall HDD market can grow going forward, with client PCs now representing less than half of industry sales. Third, gross margins continue to structurally improve given favorable supply/demand fundamentals from a consolidated industry, allowing Seagate to defend industry gross margin at 27-32% and allow any future capacity additions to lag demand. Fourth, we forecast Seagate will continue to generate $1.9B of free cash annually, representing a >12% free cash yield today, with the vast majority being returned to shareholders including the again-expanded $1.72 annual dividend (3.6% yield) and a very aggressive share repurchase program that has retired 25% of outstanding shares in less than two years.”

Seagate Technology closed on Tuesday at $48.47.