Seagate Bulls Have No Memory
Dichotomy Capital • 11 Comments
Dichotomy Capital • 11 Comments
Seagate Bulls Have No Memory
Dichotomy Capital • 11 Comments
Dichotomy Capital • 11 Comments
Jul. 30, 2015, 5:30 PM
Jul. 29, 2015, 6:39 PM
- Western Digital (NASDAQ:WDC) has guided on its FQ4 call for FQ1 revenue of $3.2B-$3.3B and EPS of $1.50-$1.60, below a consensus of $3.5B and $1.76. However, a light outlook was expected following Seagate's warning and a deluge of soft PC data.
- Western has risen to $83.11 AH. Seagate (NASDAQ:STX) has risen to $50.74 ahead of Friday morning's FQ4 report.
- Western's FQ4 results, PR
Jul. 23, 2015, 10:25 AM
- Believing cloud data center spending growth is slowing, Morgan Stanley's Katy Huberty has downgraded Seagate (STX -1.1%) to Underweight, and Western Digital (WDC -1.3%) and QLogic (QLGC -0.7%) to Equal Weight.
- Regarding Seagate (recently issued a calendar Q2 warning thanks to PC weakness), Huberty estimates cloud-related sales account for as much as 12% of revenue, and a larger % of gross profit. Her FY16 (ends June '16) revenue and EPS estimates are now respectively 6% and 20% below consensus.
- Huberty sees similar challenges for Western, albeit while adding its (M&A-fueled) flash product investments will partly offset. Her FY16 (ends June '16) gross margin estimate has been cut to 28.7% from 31%.
- As for QLogic (also recently warned), the company's core Fibre Channel/Ethernet connectivity market is expected to see "normal to below normal seasonality." She now expects revenue to drop 3% Y/Y in 2015.
- Huberty's cloud spending remarks come after Google reported its capex (growing rapidly in recent years) fell 5% Y/Y in Q2 to $2.52B. Western reports on July 29, QLogic on July 30, and Seagate on July 31.
Jul. 13, 2015, 8:16 AM
- Seagate (NASDAQ:STX) expects revenue of about $2.9B for FQ4 vs. guidance of $3.2B-$3.3B. Non-GAAP gross margin should be roughly 28.5%, with non-GAAP operating expenses of $530M vs. guidance of $555M.
- The company cites lower-than-expected intra-quarter demand.
- Unit shipments should be about 45M, maintaining market share of roughly 40% and reflecting approximately 52 exabytes.
- Full FQ4 results are due ahead of the bell on July 31.
- Shares -2.6% premarket
Jul. 9, 2015, 10:02 PM
- IDC estimates global PC shipments tumbled to 66.1M in Q2, falling at a sharper Y/Y clip than Q1's 6.7% and about 1% faster than expected. Gartner is slightly less harsh, estimating shipments fell 9.5% to 68.4M.
- Factors blamed for the decline: Inventory reductions ahead of the Windows 10 launch (set for July 29), a strong dollar (has led to higher overseas prices), and tough Y/Y comps caused by the 2014 boost in business PC sales caused by the end of Windows XP support. With tablet sales under pressure as well, tablet cannibalization is less of a factor than before ... but rising smartphone/tablet usage still appears to be taking a toll on PC upgrade rates.
- Gartner sees full-year shipments falling 4.4%. IDC still expects low-to-mid single-digit declines in 2H15, before volumes stabilize in future years. It sees the Windows 10 launch going "relatively well," but cautions Microsoft's (NASDAQ:MSFT) decision to provide free upgrades to Windows 7/8 users will limit its impact on PC sales.
- Continuing a recent trend, market leaders grabbed share from smaller rivals. IDC estimates #1 Lenovo's (OTCPK:LNVGY) share rose to 20.3% from 19.4% a year ago, #2 HP's (NYSE:HPQ) to 18.5% from 18.2%, and #3 Dell's to 14.5% from 14%. Acer (OTC:ASIYF) and Asus (OTC:AKCPF) are respectively given 6.6% and 6.5% shares
- Curiously, IDC has Apple (NASDAQ:AAPL) ranked #4 globally, with its share rising to 7.8% from 5.9% via 5.1M Mac shipments (could imply a 15%+ revenue share), but Gartner doesn't have the company in its top-5. IDC and Gartner respectively assign Apple 13.5% and 12.7% U.S. shares. In the past, IDC's Mac shipment estimates have been notably different from the quarterly figures Apple would later report.
- Near-term expectations for PC sales are already quite low, following Intel's (NASDAQ:INTC) Q1 warning, AMD's Q2 warning, Micron's (NASDAQ:MU) June 25 results/guidance, and plenty of other negative news. Intel's Q2 report arrives on July 15.
- Other PC industry names: NVDA, STX, WDC, HTCH
Jul. 6, 2015, 9:53 AM
- Cautious Cleveland Research remarks about near-term hard drive demand have led Seagate (NASDAQ:STX) and Western Digital (NASDAQ:WDC) to slump out of the gate. The Nasdaq is down 0.4%. This isn't the first time a downbeat Cleveland note has had such an effect.
- Seagate/Western fell two weeks ago after JPMorgan downgraded Western to Neutral, while citing weak PC sales. Both companies also sold off a few days later thanks to Micron's results/guidance.
Jun. 26, 2015, 8:20 AM
- Intel (NASDAQ:INTC) is down 1.7% premarket, Seagate (NASDAQ:STX) is down 1.4%, and Western Digital (NASDAQ:WDC) is down 1.1% after Micron (down 15.1%) missed FQ3 estimates and provided soft FQ4 guidance, while largely blaming PC weakness and its impact on DRAM prices. SanDisk is also off.
- Intel, Seagate, and Western have already seen a decent amount of PC-related concerns priced in. The industry is counting on Windows 10 (launches on July 29) and Intel's Skylake CPU platform (expected to begin rolling out in late summer) to spark a rebound.
Jun. 23, 2015, 3:59 PM
- Western Digital (NASDAQ:WDC) fell below $89 in regular trading following a morning JPMorgan downgrade to Neutral, and has once more pulled archrival Seagate (NASDAQ:STX) in the same direction.
- JPMorgan's Rod Hall cites weak PC sales as his reason for downgrading Western. "We continue to see little evidence of an improvement in PC fundamentals. We also note negative comments on PC demand from HP, Avago, and Micron over the last month." Oddly, he suggests Intel's Skylake CPU launch (expected to start in late summer) is another reason to be pessimistic, arguing it will, if anything, push out a seasonal demand pickup.
- Hall now expects industry hard drive shipments to fall 10.2% in 2015 to 507M, and 2.3% in 2016 to 495M. ASPs are expected to rise from $58.6 in 2014 to $60.1 in 2015 and $61.2 in 2016, thanks to a mix shift towards costlier enterprise/cloud drives.
- Goldman upgraded Western to Buy in late May, while estimating PCs will only account for 38% of 2015 revenue.
May 28, 2015, 9:49 AM
- Believing its current valuation doesn't take into account strong enterprise/cloud demand, Goldman's Bill Shope has upgraded Western Digital (NASDAQ:WDC) to Buy, and hiked his target by $16 to $122. As is often the case, Seagate (NASDAQ:STX) is going in the same direction as Western.
- Shope: "We estimate that PCs will represent 38% of Western Digital's revenue in CY2015, down from nearly 70% in CY2007. As a result, PC volatility is not nearly as big of a driver of fundamentals as it once was." He forecasts PC-related shipments (hurt by both soft PC sales and SSD encroachment) will see a -9% CAGR from 2014-2016, and that enterprise shipments (lifted by cloud/analytics demand and Western's flash storage offerings) will see an 8% CAGR.
- Western currently trades for 12x estimated FY16 (ends June '16) EPS. Seagate goes for 11x estimated FY16 (ends June '16) EPS.
May 21, 2015, 9:30 AM
- Alongside Goldman's list of 50 stocks appearing most as top holdings at hedge funds is its list of the 50 top shorts.
- New additions this quarter: Baxter Intl (NYSE:BAX), UPS, Marriott (NASDAQ:MAR), NextEra (NYSE:NEE), Ford (NYSE:F), National Oilwell Varco (NYSE:NOV), McDonald's (NYSE:MCD), M&T Bank (NYSE:MTB), CenturyLink (NYSE:CTL), Amgen (NASDAQ:AMGN), Pioneer Natural (NYSE:PXD), Duke Energy (NYSE:DUK), Seagate (NASDAQ:STX), AbbVie (NYSE:ABBV), Cisco (NASDAQ:CSCO).
- The full list (in order of $ value of short interest): AT&T (NYSE:T), Disney (NYSE:DIS), IBM, Verizon (NYSE:VZ), Intel (NASDAQ:INTC), Kinder Morgan (NYSE:KMI), Exxon (NYSE:XOM), Pfizer (NYSE:PFE), J&J (NYSE:JNJ), Deere (NYSE:DE), Caterpillar (NYSE:CAT), Exelon (NYSE:EXC), GE, Boeing (NYSE:BA), Halliburton (NYSE:HAL), Fox (NASDAQ:FOXA), Comcast (NASDAQ:CMCSA), UTX, Regeneron (NASDAQ:REGN), Merck (NYSE:MRK), salesforce.com (NYSE:CRM), AbbVie (ABBV), Conoco (NYSE:COP), Wal-Mart (NYSE:WMT), Eli Lilly (NYSE:LLY), Celgene (NASDAQ:CELG), Schlumberger (NYSE:SLB), AutoZone (NYSE:AZO), Wells Fargo (NYSE:WFC), Emerson (NYSE:EMR), McDonald's (MCD), Reynolds (NYSE:RAI), Target (NYSE:TGT), Accenture (NYSE:ACN), Coca-Cola (NYSE:KO).
May 19, 2015, 12:11 PM
- FBR's Chris Rolland, after talking with Intel (INTC -1.2%) IR chief Gary Willihganz: "While excess PC inventory dynamics were well known exiting 2014, we believe many investors did not expect additional PC inventory drain into the Win10 release. Intel was careful to explain these nuanced inventory dynamics, which we believe may have also been a contributor to the weaker-than-expected ODM shipments witnessed in April."
- Rolland adds that while Intel "expects inventory replenishment in 2H15 around the Win10 release, it was careful to temper expectations for a surged uptick in demand." A Q1 CC remark from AMD CEO Lisa Su suggested Windows 10 (NASDAQ:MSFT), whose Start menu and enterprise-friendly features could help boost industry demand, will launch in late July.
- Also: Morgan Stanley says it's cautious on PC names in the near-term (moreso on chipmakers than other firms) given soft Q2 PC/hard drive inventory builds and weak April sales from ODMs. It sees normal seasonal growth following a rough Q1, and doesn't expect a recovery occurring before Q3.
- Micron (MU -2.1%), Seagate (STX -3.3%), and Western Digital (WDC -1.5%) are lower on a day the Nasdaq is near breakeven. Micron, which is close to its 52-week low, fell on Friday after Nomura cut estimates on PC DRAM pricing fears. Microsoft is down 0.7% after factoring its dividend payment (shares are trading ex-dividend today).
May 18, 2015, 3:03 PM
- Goldman's sees the S&P 500 hitting a mid-year high of 2,150 by mid-year, but fading to 2,100 by year-end after the Fed hikes rates. Its 12-month forecast of 2,125 stands against the current level of 2,130.
- With appreciation returns expected to be nil, Goldman suggests having a look at its dividend growth portfolio - a sector-neutral basket of 50 stocks. They have a median yield of 2.5% and are expected to boost payouts by 16% this year and 12% in 2016. The group's P-E ratio is 15 vs. 17.3 for the S&P 500.
- The ten highest-yielding additions: Harley-Davidson (NYSE:HOG) - with a 2.3% yield, Home Depot (NYSE:HD) - 2.1%, Dr. Pepper Snapple (NYSE:DPS) - 2.5%, National Oilwell Varco (NYSE:NOV) - 3.6%, Regions Financial (NYSE:RF) - 2.3%, Baxter International (NYSE:BAX) - 3.1%, Cummins (NYSE:CMI) - 2.4%, Seagate Technology (NASDAQ:STX) - 3.9%, International Paper (NYSE:IP) - 3.1%, AES Corp (NYSE:AES) - 3%.
- Looking over a ten-year horizon, Goldman expects dividends to account for 46% of the S&P 500's 5% annualized return, up from 20% during the current bull market which started in 2009.
- ETFs: DVY, SCHD, ADX, SDOG, DLN, DHS, FDL, DTD, FVD, DVYL, SDYL
May 12, 2015, 9:12 AM
- Seagate's (NASDAQ:STX) Cayman Islands subsidiary is selling $700M worth of senior notes due 2027 - $300M more than originally planned. The notes carry an interest rate of 4.875%, and will yield net proceeds of $692M.
- The hard giant says its potential uses for the proceeds include "replenishing cash associated with the redemption of the outstanding 6.875% Senior Notes due 2020, capital expenditures and other investments in the business."
- Seagate ended FQ3 (calendar Q1) with $2.6B in cash/short-term investments, and $3.9B in long-term debt. 3 weeks ago, the company added $2.5B to its buyback authorization.
May 1, 2015, 5:23 PM
- Seagate (NASDAQ:STX) is combining its Cloud Systems and Solutions unit, which provides a variety of storage appliances and subsystems for cloud, HPC, scale-out storage, and data protection use cases (among others), with its Electronic Systems unit, which is responsible for its SSD/flash storage ops.
- Electronic Solutions EVP Phil Brace will head the combined unit. Cloud Systems and Solutions president Jamie Brace "will be stepping down and transitioning over the next few months."
- CEO Steve Luczo: "Over the last year we have acquired a unique set of capabilities in storage systems, high performance computing and flash memory PCIe ... By bringing together our cloud systems and solutions and electronic solutions organizations we will be able to better align our full breadth of hardware expertise and enterprise storage capabilities."
- The move follows last year's acquisitions of storage subsystem maker Xyratex and Avago/LSI's flash products unit, and comes amid a broader effort by Seagate to offset weak PC demand and SSD cannibalization of hard drive sales by growing its enterprise/flash exposure.
Apr. 23, 2015, 5:15 AM
- Seagate's (NASDAQ:STX) board has authorized it to repurchase up to $2.5B of its outstanding ordinary shares.
- As a result, Seagate currently has an aggregate authority to repurchase $3.1B of its ordinary shares.
Apr. 17, 2015, 11:00 AM
- In addition to missing FQ3 revenue estimates (while beating on EPS), Seagate (NASDAQ:STX) has guided on its CC (webcast) for FQ4 revenue of $3.2B-$3.3B, below a $3.42B consensus. However, a light outlook was expected given the PC industry's recent woes. Demand is expected to pick up in 2H15 thanks to higher PC/console sales and continued enterprise/cloud strength.
- $706M was spent on buybacks in FQ3, helping EPS beat estimates in spite of a revenue miss. Also: Gross margin was 28.9%, +70 bps Q/Q and +40 bps Y/Y, and above guidance of 28.5%. While revenue fell 2% Y/Y, operating expenses rose 18% to $555M, thanks to both higher R&D and marketing/admin spend.
- Boosting margins: Shipments of enterprise drives (higher-margin) rose 18% to 9.1M thanks to a server upgrade cycle and Web/cloud demand. PC drive shipments fell 14% to 31.1M, with plunging desktop volumes offsetting slight notebook growth. Consumer drives -11% to 4.8M; branded drives -14% to 5.1M. Hard drive ASP rose $1 Q/Q and Y/Y to $62.
- Western Digital (NASDAQ:WDC) is following Seagate higher ahead of its April 28 FQ3 report. The gains come in in spite of a 1.5% drop for the Nasdaq. BofA's upgrades are looking good for now.
- Seagate's FQ3 results, PR, earnings slides (.pdf)
Seagate Technology Plc engages in the provision of electronic data storage technologies and solutions. Its products and services include network attached storage, high performance computing, data protection appliances, internal hard drives, backup and recovery services, flash storage, and... More
Industry: Data Storage Devices
Country: United States
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