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Tuesday, February 14, 2006

Seagate Update

Seagate Technology (STX) rallied on Monday and close on 25.96. Today, the stock rose higher on the news, Seagate, Maxtor U.S. antitrust review time expires. The stock pulled back a little towards the end of the day and closed at 26.04 (after hours trading closed the stock at 26.00). I think the past two days action is a good indicator the stock will continue going to do well. I'm very bullish on this company. Let's recap the positives: Seagate is the leader in the hard drive industry Current P/E12.35 (very low compared to tech sector) Forward P/E 11.52 Expected Growth of 12.5% per year for the next 5 years 12.5% Profit Margin 8.54B in Revenue 1.75B cash on hand $3.6 cash per share Low debt Pays Dividend (Not many tech companies pay dividends) Vertical Storage Technology - allows HD size over 100 gigabits per square inch, eventually 1-TeraByte HD on a single 3-inch disc Hard drive demand growing due to popularity of mp3 players, cameras and pda devices I created a position of 500 shares at 25.00 last week. Today's closed of 26.04 gives me an unrealized profit of $1.04 a share. I think there is a lot of upside to this stock, and even the one-year target of $30 is an understimated value. The demand for harddrives is increasing as more people are using digital recorders and high mega-pixel cameras. Also, the fact that we are becoming a more data-driven society makes backing up data on harddrives more cruical. The increase demand in harddrives is imminent and Seagate, being the leader in hard drive technogloy, will be your best bet to capture some of this market exposure. I think Seagate is a high-growth investment that will surely pay off in the long term.


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