Seagate Technology Holdings PLC

STX Details

Seagate Technology Holdings PLC (NASDAQ: STX) is a prominent global data storage technology and solutions company that sells a variety of data storage devices, such as hard disc drives (HDDs), solid-state drives (SSDs), solid-state hybrid drives (SSHDs), storage subsystems, and an edge-to-cloud mass data platform. Original equipment manufacturers (OEMs), distributors, and retailers are among its most important clientele. Since its inception, the company has shipped over 3.0 billion terabytes of data capacity. As of December 06, 2021, STX's market capitalization stood at USD 23.47 billion.

Latest News:

• Dividend Declaration: On October 22, 2021, STX declared a quarterly dividend of USD 0.70 per share, payable in cash on January 05, 2022, to shareholders of record on December 22, 2021.

Q1FY22 Results:

• Improved Revenue: STX's revenue increased by 34.62% to USD 3.12 billion in Q1FY22 (ended October 01, 2020) compared to USD 2.31 billion in Q1FY21 (ended October 02, 2020), owing to increased demand from cloud data center clients and market dominance in video and image applications.
• Surge in Net Income: Its Q1FY22 net income increased drastically to USD 526 million from USD 223 million in Q1FY21.
• Leveraged Balance Sheet: It exited the quarter with a cash balance of USD 991 million and total debt of USD 5.14 billion.
• Share Repurchases: During Q1FY22, STX repurchased 4.9 million ordinary shares for USD 425 million.

Key Risks:

• Supplier Concentration: Some of STX's raw materials are sourced from single-source direct and indirect vendors. Hence, the failure of a significant supplier to produce the components on schedule can affect its operating performance.
• Global Trade Risks: A significant portion of the company's revenue comes from sales outside the US. Any disruptions in the economic, environmental, political, legal, or regulatory landscapes of the countries it operates in might adversely impact its production and sales operations.

Outlook:

• Estimated Q2FY22 Revenue: In its Q1FY22 earnings release, STX stated that its Q2FY22 revenue is expected to be USD 3.1 billion (+/- USD 150 million).
• EPS Guidance: It anticipates its non-GAAP diluted EPS to be USD 2.35 (+/- USD 0.15).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

STX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

STX's stock price has surged 61.68% in the last 12 months and is currently leaning towards the higher end of its 52-week range of USD 58.04 to USD 116.93. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 60.03. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 98.83.

Considering the significant surge in the stock price, high leverage, and the current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 103.59, down 1.73% as of December 06, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Del Taco Restaurants, Inc.

TACO Details

Del Taco Restaurants, Inc. (NASDAQ: TACO) is an operator and franchisor of Del Taco quick-service Mexican American restaurants. As of September 07, 2021, the company operated 603 restaurants in the US, most of which are concentrated in the Pacific Southwest region. Its menu includes a wide variety of Mexican and American dishes such as burritos, fries, etc.

 Latest News:

• Partnership with REEF: On October 12, 2021, TACO announced a delivery-only agreement with REEF, a North American parking real estate and delivery operator, to expand its presence to Los Angeles' Mid-City neighborhood's, the first of many planned delivery-only locations.

Q3FY21 Results:

• Stable Revenue: The company's total revenue increased by 2.89% to USD 124.27 million in Q3FY21 (ended September 07, 2021) compared to USD 120.78 million in Q3FY20 (ended September 08, 2020). The company-operated restaurant sales amounted to USD 112.0 million, up 2.25% YoY.
• Decline in Net Profit: Its Q3FY21 net income reduced to USD 3.84 million from USD 5.80 million reported in Q3FY20.
• Balance Sheet Position: As of September 07, 2021, TACO had cash & cash equivalents of USD 3.38 million and total debt of USD 105.64 million.
• Other Quarterly Events: During the quarter, the company repurchased 449,324 common shares for a total consideration of USD 4.4 million. It had ~USD 10.6 million available under its repurchase authorization at period end. In addition, on November 24, 2021, TACO paid a quarterly dividend of USD 0.04 per common share to its shareholders of record on November 03, 2021.

Key Risks:

• Geographic Concentration: Southern California locations accounted for 74% of TACO's income in FY20 (ended December 29, 2020). As a result, any adverse changes in the economic climate in this market could impact TACO's financial performance.

Outlook:

• FY21 Guidance: TACO aims to spend around USD 30 million on capex in FY21, with general and administrative expenses accounting for 9.0% of total revenue. It also intends to open four company-operated restaurants and nine franchised locations during the year.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TACO Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

TACO's share price has surged 61.63% in the past week and 45.80% in three months and has breached its previous 52-week range of USD 7.34 to USD 11.99. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 83.65, indicating an overbought zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 10.38.

Considering the significant uptick in the stock price in a short span, technical indicators, and the current valuation, we recommend a "Sell" rating on the stock at the current price of USD 12.515, up 66.20% as of December 06, 2021, 11:50 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and industry information have been taken from REFINITIV.  

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.