Tackling the Seagate Technology PLC (STX) Value Trap Argument

I plan on following the path these two companies take closely, because right now, SSD offerings are light and hybrid drives seem to getting a lot of attention. About two months ago during my last Seagate article, hybrid drives were seen as a poor substitute to full SSDs, but recently, the numbers have supported hybrid drives as a valid step before moving to fully SSD storage.

SanDisk Corporation (NASDAQ:SNDK) offers exposure to a completely different type of storage medium that will see increasing demand as devices get smaller and smaller. Flash drives provide the ideal medium of storage for tablets and mobile devices. SanDisk is a leader in this technology, and unless you think tablets and smartphones are going to become less important, SanDisk represents a solid investment. The only concern I have is declining net income. The company is positive and revenue seems to be recovering. If the company can stay disciplined about expenses, then increasing earnings could be just around the corner. The stock is up quite a bit, so SanDisk might be a pass considering its 30+ PE ratio.

Conclusion

Seagate is my favorite. The hesitation about Seagate seems to stem from the shrinking PC market. I think cloud storage needs will grow faster than the PC market shrinks. We can now store documents, photos, and videos online. All these used to be stored on our home PCs, but they are spread across different companies on the Internet. All those companies need to build their own storage capacity with backups and redundancy to ensure quality of service. Seagate at its very core is a dividend investment so it is not necessary to wait for a better entry. However, the market is at record highs and a pullback could give you a better price since the price might decline through no fault of the company.

Nihar Patel has no position in any stocks mentioned. The Motley Fool owns shares of Western Digital.

The article Tackling the Seagate Value Trap Argument originally appeared on Fool.com and is written by Nihar Patel.

Nihar is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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