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Bear of the Day: Seagate Technology (STX)

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Headquartered in Dublin, Ireland, Seagate Technology (STX - Free Report) is a global leader in data storage solutions. They are the second-largest manufacturer of hard disk drives in the US and offer other electronic data storage products including solid state hybrid drives, solid state drives and peripheral component interconnect express cards.

Weak Results

Seagate reported disappointing results for its fourth-quarter fiscal 2017 with both earnings and sales missing our estimates. Non-GAAP earnings of $0.65 per share fell 41% on a sequential basis and were significantly below the Zacks Consensus Estimate of 99 cents.

Revenues fell 9.3% year-over-year to $2.41 billion and also missed the estimate of $2.55 billion. Intense competition in the hard disk drive market from Western Digital and others hurt the results.

The stock fell almost 19% after the release.

Falling Estimates

Zacks Consensus Estimate for the current and next year have plunged to $3.83 per share and $4.12 per share respectively, from $4.75 and $4.77, before the results.

The Bottom Line

Computer Storage industry is witnessing a lot of competition lately. Further declining PC shipments have also created headwinds for the company.  In addition to a Zacks Rank #5 (Strong Sell), Seagate has a negative Earnings ESP of 11.63% suggesting strong chances of missing estimates again.

“Computer- Storage Devices” industry is currently ranked in the top 32% of all Zacks industries. Investors could consider Super Micro Computer (SMCI), which currently has a Zacks Rank #1 (Strong Buy).


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