Shares in hard disk-maker Seagate Technology
PLC(NASDAQ:STX) fell after an analyst at Needham & Co downgraded the stock
to 'Hold' from 'Strong Buy".
The stock was down 4.5 percent earlier in the day
before pulling back slightly to trade at $31.72.
Needham analyst Richard Kugele said that there were
signs of weakness across the hard-disk drive sector. He said his downgrade
reflected "slower industry demand conditions, inventory at OEMs and share
shifts."
He also said that the imminent release of Microsoft's
Windows 8 operating system for personal computers was unlikely to stimulate
demand for PCs and notebooks.
Kugele said that he had not rated the stock lower as
“the company has significant cash flow being redeployed into buybacks and
dividends, and should still maintain a margin profile well ahead of historical
industry standards.”
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Investors Ignore STX Now? Or Can Buy At Current level? Find Out Here
If the downtrend in demand for computers continued he
forecast that during the September quarter sales would be i the region of 145
million to 155 million units.
Seagate will
be holding a meeting with analysts on September 21 in New York. “We expect STX
to talk about the current demand headwinds, but to really highlight the
long-term data growth opportunity and the improved margin profile post
industry consolidation,” Kugele wrote. “Generally, we expect a positive meeting
amid weak demand.”
For the June
2013 fiscal year, Kugele now sees profits of $6.96 a share, down from $8.50;
for FY 2014, he goes to $7.57, form $9.65.
Kugele left his strong buy rating on Seagate rival Western
Digital Corp. unchanged on the grounds that the company has been conservative
in its business forecasts.
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