Disk Drives: BMO Turns Cautious; Notes Recent Price Declines
By Eric Savitz
* Friday, March 26, 2010 ET
Disk-drive shares are coming under selling pressure this morning on some cautious comments about fundamentals in the sector from BMO Capital analyst Keith Bachman.
Bachman writes that channel checks on Seagate (STX) and Western Digital (WDC) find that pricing over the past few weeks has been “much more aggressive,” with 3.5-inch drive prices down 5%-10%. He also says inventory in the channel has moved higher. He thinks this reflects an increase in industry capacity, in particular at Hitachi.
Bachman today lowered his rating on STX to Market Perform from Outperform, slicing his price target to $23, from $26. He trimmed his June 2011 EPS forecast to $3.12, from $3.52.
For WDC, his price target is now $46. down from $47; his June 2011 EPS forecast drops to $6.58, from $6.20.
In today’s trading:
* STX is down 65 cents, or 3.3%, to $18.97.
* WDC is down $1.43, or 3.5%, to $39.25.
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