UPDATE: JPMorgan Downgrades Seagate Technology (STX) to Underweight on Deteriorating Fundamentals

December 12, 2012 7:16 AM EST
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Price: $37.44 +2.94%

Rating Summary:
    8 Buy, 26 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 19 | Down: 19 | New: 13
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(Updated - December 12, 2012 9:04 AM EST)

Shares of Seagate Technology (NASDAQ: STX) are indicated sharply lower Wednesday after JPMorgan downgraded the stock from Neutral to Underweight and slashed its price target from $25 to $20. The firm said end market dynamics and market share loss potential stand to weigh on the shares.

"While Seagate has benefited disproportionally from the impact of the tragic Thailand flood over the past year, we believe macroeconomic and secular factors stand to pressure the company's revenue and gross margin profiles," analyst Mark Moskowitz said. "In our view, HDD stocks trade on gross margin trend-lines, which are likely to worsen, driving our call today."

Moskowitz said while the stock could remain in the next 30-45 days as LBO speculation continues, fundamentals are deteriorating.

The firm revised C2013 HDD industry unit growth assumption for a decline of -1.5%, versus growth of 2.4% previously.

"We believe that as signs of deteriorating fundamentals manifest, investors likely will lock in gains in Seagate and rotate into other stocks in 2013. In our view, the stock already has adjusted for the favorable capital allocation strategy."

For an analyst ratings summary and ratings history on Seagate Technology click here. For more ratings news on Seagate Technology click here.

Shares of Seagate Technology closed at $29.03 yesterday.

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