Seagate shares get a boost after strong 2nd-quarter results, solid 3rd-quarter forecast

Seagate shares jump after strong 2Q results

NEW YORK — Shares of Seagate Technology surged Thursday to their highest level since June 2008 after the maker of hard disk drives posted better-than-expected results for the fiscal second quarter amid a rebound in the PC market.

The company’s shares rose $1.82, or 10.2 percent, to $19.58 in late morning trading even as the broader market fell. Earlier, the stock hit $20.30, its highest point in a year and a half.

Seagate’s results were well above Wall Street’s expectations, and the company’s outlook for 2010 seemed to reassure investors about the economic recovery.

Wedbush Morgan analyst Kaushik Roy said 2010 will likely be the “year of the hard disk drives” as demand improves and pricing is expected to be “healthy at least for the next couple of quarters.” The analyst, who rates Seagate “Outperform,” raised his target price to $25 from $22.

Roy called Seagate’s outlook a pleasant surprise and noted the company indicated that demand for hard disk drives in every segment “is likely to remain strong in the next few quarters.”

“Despite the steep run-up in the (Seagate) stock we would encourage investors to buy the stock at these levels,” he wrote in a note to investors. “The stars are all aligned for the (hard disk drive) industry and for (Seagate) at this time.”

In a conference call with analysts, Seagate said it expects earnings of 88 cents to 92 cents per share for the quarter ending in March. The forecast includes charges of 2 cents per share. The company expects revenue of about $2.9 billion to $3.1 billion.

Analysts, on average, have projected profit of 56 cents per share on sales of $2.72 billion, according to a poll by Thomson Reuters.