Jeff,
"Why shouldn't SEG fall to a PE of ~15 resulting in a price of ~$17? Has the market over-reacted to WDC and QNTM? Is the market artifically over-valuing SEG?"
The "market" is assuming that Seagate's recent (and project for the next quarter or two) earnings are artificially low. That is, their earnings power given their asset base is far in excess of what is coming down now. Therefore, "they" ("it", whatever) are giving for the moment the benefit of doubt to SEG, assuming that once this blows over, their earnings will rebound sharply. If you disagree with that assessment, you should short it. It may well go down still more before it goes back up. But, IMO, these are pretty close to fire sale prices for this company (mid 20s, that is)--I still believe that the stock will at least triple from these levels over the next 2-3 years. However, they have certainly traded at lower valuation levels than these in the past, and probably will do so again over the next few months.
Sentiment is heavily negative toward the drive stocks. Will continue to be so for awhile, probably for the next couple of months at any rate. Visibility beyond that is poor. But, unless you believe that this industry will become another DRAM disaster, that is the best time to buy for great long term capital gains.
It is time to revive the "Buy whem blood is on the streets" thread. |
