Disk Drives: The Hits Just Keep On Coming; BMO Slices Ests
By Eric Savitz
Friday, July 9, 2010 ET
blogs.barrons.com
Yet another analyst has taken a hatchet to EPS estimates and price targets for the disk-drive stocks Seagate (STX) and Western Digital (WDC).
BMO Capital analyst Keith Bachman late Thursday repeated his Market Perform ratings on both stocks, while chopping his price targets to $17 from $25 for STX, and to $37, from $50 for WDC.
For Seagate, he chopped his June quarter EPS forecast to 78 cents from 84 cents; for the September quarter he goes to 73 cents, from 92 cents. For the June 2011 fiscal year, he now sees $2.73, down from $3.35.
For Western Digital, his June quarter forecast falls to $1.36, from $1.43; for the September quarter, he now sees $1.31, down from $1.66; for the June 2011 fiscal year, he goes to $5.28, from $6.32.
Despite all that, he contends that current valuations are at a historic low, and “do not support a bearish view” on the stocks.
But he adds that “negative estimate revisions will continue in the near-term, which should keep the drive stocks largely in check.”
Bachman thinks June quarter results will come in modestly below Street estimates, due largely to weaker gross margins. He also thinks September quarter guidance will be conservative, in particular for gross margins.
The analyst thinks the total addressable market in the June quarter was in the 150-155 million unit range, below the 155-162 million Seagate and Western have been projecting; in the September quarter, he expects the market to grow 10% sequentially, to about 168 million units.
On Thursday, STX rose 23 cents, to $13.69; WDC rose 28 cents, to $31.56. |
