Seagate: Baird Downgrades; Drive Industry Weakening

Seagate (STX) shares are lower today after Robert W. Baird analyst Jayson Noland cut his rating on the stock to Neutral from Outperform. The downgrade, he writes, reflect his view that “industry conditions have continued to worsen throughout the month of March.” He set a price target on the stock of $22.

Noland says disk-drive industry revenue has stretched beyond the recently reported range of 4-6 weeks, “while pricing has come down more than we had anticipated.” Noland notes that results for the company’s fiscal third quarter ending this month were “likely OK.” Earlier this month, Seagate raised guidance for the quarter, citing a favorable product mix and slightly better than expected pricing. Noland thinks enterprise drive demand “continues to trend positively,” but that desktop drives remain “troubled.”

Noland also cut his price target on Western Digital (WDC) to $32 from $35, again citing weakening industry conditions.

This morning, Seagate is off $1.19, or 5.5%, at $20.63; Western is down $1.21, or 4.1%, at $28.26.