Seagate Technology: Well-Positioned for the PC Rebound

Even so, it would be foolish to disregard what appears to be a strong mobile trend. Mobile technology has advanced much faster than expected and its reach is broadening, and the conventional, box-based desktop PC may not have a 5-year window -- we will likely see more 'laptops on desktops' and then the emergence of even smaller, mobile computer devices, in the years ahead. Still, the view from here argues there's at least one more upgrade cycle for desktops -- to Seagate's benefit -- before society shifts to 'the computer anywhere/everywhere.'

The First Call FY2010/FY2011 EPS estimates for STX are $3.38 to $3.47. Each EPS estimate looks about 10% low, according to my analysis.

Technically, Seagate's stock chart has, for the most part, remained above the key, 50-day moving average since the July 2009 review -- a sign that institutional investors (IIs) are adding/establishing positions in STX.

2010 Outlook: I view Seagate as a long-term play, but if investors are looking to sell STX within the year, it's probably best to take your profits after it rises to $24-25, if it fails to clear $26.

Stock Analysis: I consider Seagate Technology to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, and I liked the stock enough to buy it, I'd consider buying a 25% position in STX now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my STX position before April 2010 and I'd put a sell/stop loss at: $9.40.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.