Storage stocks: Seagate and Western Digital
Bullish and bearish forces are fighting over the storage names today. The chip sector is falling, carrying over weakness from overseas. Pressure came out of South Korea, where SK Hynix dropped and dragged the whole semiconductor group down. Seagate and Western Digital are both under pressure as a result. Investors are questioning the huge AI spending, asking where these winners' valuations sit now and whether the run can keep going.
Citigroup says the momentum can continue. It raised its price target on Western Digital to 800, up from 685, with a buy rating. On Seagate, it raised the target to 1240, up from 1150, also with a buy rating. Both names have posted big gains year-to-date and year-over-year. They had been under pressure recently, then recovered ground last week around the flashy US debut of SK Hynix.
Citi is constructive on networking infrastructure spending and on storage demand tied to AI. Every AI server needs a large amount of storage, not just powerful GPUs. Citi sees the long-term secular trends staying intact despite the near-term swings in the sector.
American Express upgrade
JPMorgan Chase upgraded American Express to overweight from neutral, turning bullish. The shares gained about 1.75%. The call rests on resilience rather than faster growth, and specifically on the higher-income customer. This is a play on the K-shaped economy and the upper part of the K.
JPMorgan says these customers are relatively shielded from the geopolitical risk in the market and are generally less hurt by higher gas prices, inflation, or rising borrowing costs. They may flinch at high gas prices but will still pay. They can service whatever debt they carry. The Iran conflict tends to hit middle- and lower-income households harder, so it is not an overhang for the AmEx case. American Express is expensive on valuation relative to its sector, and JPMorgan says that is fine.
MGM takeover talks
Barry Diller is at the bargaining table over MGM. According to the Wall Street Journal, his company, IAC, is in takeover talks with MGM Resorts. MGM shares rose about 1.25% or a bit more. MGM has set up a special board committee and hired advisors to evaluate Diller's proposal, a sign the talks have moved past an early stage. Discussions reportedly intensified this month.
Diller reportedly submitted an offer earlier this month to buy the MGM shares he does not already own, valuing the company at roughly 12.4 billion dollars. His side already owns a little more than a quarter of MGM. No agreement is guaranteed.
