Cowen Cuts PT on Seagate (STX) to $23; Q3 Results Worse than Expected
Cowen and Company cuts its price target on Market Perform-rated Seagate Technology (Nasdaq: STX) from $35 down to $23 following Q3 results issued earlier Friday.
Analyst Karl Ackerman offered the following commentary on Seagate following today's report:
Headline EPS guide of ~$0.15 was $0.40 BELOW published Street that came in below even the most bearish expectations. March was supposed to be the Q where the TAM troughed, but WDC’s guide and STX’s revenue outlook suggests another stepdown in June. What is somewhat perplexing to us is that it appears both industry SSD and HDD revenue this Q are growing below end market demand.
Some of that can be explained by softness in enterprise IT spending, but it may also be that volume has been impacted by hyperscale customers increasingly procuring their own drives.
What is apparent and as we have previously discussed, however, is that the company’s steadfast view on paying the current $760 million/yr dividend (>11% at these levels) limits its ability to make meaningful investments to offset challenges in its core HDD TAM.
From here, we see a more streamlined cost structure should help weather the storm, but we see the stock languishing near-term until there is a marked improvement in enterprise spend or STX pursues a more meaningful flash strategy to catalyze the next leg of growth,
the analyst noted.
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