It was Western Digital which was in the most trouble in Thailand, but it has recovered. Now we are a full quarter past the Seagate acquisition of the Samsung drive unit. Investors needed to be buying these stocks in mid-too-late 2011 when they were under pressure. We now have effectively what is two guidance hikes out of Seagate and it has performed almost the same as Apple Inc. (NASDAQ: AAPL) so far in 2012 and has nearly tripled since the lows seen last year.
Over at Western Digital, we called it a value stock in November when shares were down closer to $27 with the call that when things normalize it will be back at $35.00. These were not just value stocks at the time; they were turnaround stocks. Apparently we are just too conservative because Western Digital is now up above $41.00 after a 5% gain today.
The other driver for the drive-makers is that there is virtual duopoly now that Western Digital has closed its Hitachi HDD purchase in March and since Seagate closed its acquisition of the Samsung HDD unit back in December. Maybe the companies look less like value stocks in some of their respective stock screens now, but investors chasing these now things are finally good have really missed a large portion of this ship’s journey.
Can these continue running higher? Yes, of course they can. Seagate is currently just above $29.00 and the Thomson Reuters consensus analyst target without considering today’s news is $32.72; Western Digital is now above $$41.00 and the Thomson Reuters consensus price target is $47.20 without considering any changes from today’s news. Those price targets have ratcheted higher and higher as the companies have continued to recover. The difference we have in not wanting cheer today’s gains on endlessly in the drive-makers is that we would point out that the easy-money here has been made. Maybe the easy-money has been made and then some.
JON C. OGG