Deutsche Bank Maintains Buy on STEC (STEC) Despite EMC Inventory Push Out
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Analysts at Deutsche Bank commented on STEC (Nasdaq: STEC) following earnings after the close and a disclosure that customer EMC believes it will have excess inventory which they will use in 2010. The firm views valuation as compelling and STEC as well positioned when adoption happens. The firm maintains their Buy rating, but lower price target from $45 to $36.
Shares of STEC are down 29% this AM after the EMC disclosure.
Commenting specifically on this the firm said, "The big announcement on the call was that EMC may not be able to sell the entire $120M it has committed to purchasing in F2H09, creating the potential for lower sales in F1Q10 as EMC works through its inventory. Although disappointing, the push out of adoption is not unusual in a new market. We expect this adoption to continue to be lumpy as customers have not fully embraced the benefits of SSDs. While the ramp of SSD adoption gets pushed out, concerns about competition, ASP declines and margin pressure proved unfounded in F3Q09 as ASPs were up, margins were flat ~50% and there continues to be no competition in the FC."
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