UPDATE: Fox Advisors Downgrades Seagate Technology (STX) to Equalweight

Fox Advisors analyst Steven Fox downgraded Seagate Technology (NASDAQ: STX) from Overweight to Equalweight.

The analyst comments "We reduce our rating on the shares of Seagate (STX; $83.61) from Outperform to Equal-Weight after a dramatic FQ4 (Jun) “miss and lower”. We are concerned by how weakening consumer electronics spending, especially in China, on already de-
emphasized Legacy HDD sales (18% of total) hurt EPS. More importantly, an HDD inventory correction across its highest margin Mass Capacity products (73% of total), led by cloud service providers in China, is hurting FQ1E (Sept) despite solid cloud spending trends, while a post-COVID recovery in the installation of video and image application HDDs (VIA; ~10% of sales) in China seems harder to predict for the remainder of 2022E. Despite risks that the macro backdrop could weaken further, STX is already calling for a demand recovery, starting at least slightly in FQ2E (Dec) led by Legacy HDD sales, which it thinks leads to F2023E sales being “flat to slightly up” YoY. We are having a difficult time calibrating to this outlook and reduce F2023E sales, margin and EPS from $12.35B, 19.1% and $9.55 to $11.18B (-4% YoY), 17.0% (vs. 18.4% in F2022) and $7.60. Based on indications of where the stock is likely to open this morning, the shares would still be at ~10X our new F2023E EPS or within its C2016-C2021 range of 8.5-11.5X. Thus, we think the stock trades in a range for the time being with solid downside support from free cash flows (FCF), a healthy dividend, and an advancing technology roadmap."

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 $83.61 yesterday.

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