2 Storage Makers With Significant Upside Potential: Western Digital Corp. (WDC), Seagate Technology PLC (STX)

The consensus EPS estimates for the quarter was $1.28, but the company reported earnings of $1.38, easily beating estimates. The revenues were also better than expected with the primary reason being higher price points. A favorable mix, with the enterprise segment having a bigger share, has been one of the primary reasons behind higher revenues and earnings beat. The main concern from these earnings was the surprisingly low guidance for the next quarter. The company expects to generate revenues of $3.25-$3.45 billion, way below consensus expectations of $3.49 billion.

Despite a weak quarter ahead the stock is still a buy at a P/E of 6.7x and a staggering dividend yield of 4.5%. There is still uncertainty over the PC recovery, which is one of the main reasons for the weak guidance.

Bottom line

The growth in Windows 8 and other hand-held devices are all leading to increased demand for cloud based storage applications. I believe despite the maturity of PC industry there is still a lot of room for growth in storage industry. The enterprise segment will continue to grow with increased demand of cloud storage by hand-held devices and any PC revival in the future is an added bonus at these levels.

The article 2 Storage Makers With Significant Upside Potential originally appeared on Fool.com and is written by Waqar Saif.

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