Disk-Drive Stocks Are Sliding. Analyst Sees Trouble on Two Fronts.
   
By
Eric J. Savitz
Aug. 24, 2021 2:06 pm ET
The analyst rates both Seagate and Western Digital at Neutral.
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Shares of the disk-drive makers Seagate Technology Holdings and Western Digital are under pressure following cautious comments about both supply and demand from Edgewater Research analyst Kevin Rottinghaus.
Seagate shares (ticker: STX) were down 5.2%, to $86.94, while Western Digital stock (WDC) was off 2%, to $61.02.
Rottinghaus, who has Neutral ratings on both Seagate and Western Digital, said in a research note that while complications in the supply chain make it hard to determine the real level of demand, the disk-drive market appeared to be “tending in line or softer” in the September quarter through mid August.
PC-related demand for drives appears to be softening, he said, including “a leveling off” in enterprise-focused models, with component supply issues still limiting production of PCs and servers. Shortages of key parts for PCs and server components, he wrote, are triggering push-outs in related markets, including disk drives. Covid-related production issues in Southeast Asia could pose a risk for drive supplies in the December quarter, he said.
Rottinghaus also said he expects industry shipments of so-called nearline drives—high-capacity storage used in data centers—-to be down by 500,0000 units from the March quarter as Amazon.com and Google digest previously purchased inventory.
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He is also seeing dissipating demand from cryptocurrency farmers, a factor that drove up demand for high capacity drives earlier in the year. Rottinghaus said that pricing for nearline drives, which had recently been increasing, is likely to return to low-single-digit declines in the first half of calendar 2022.
The bottom line, Rottinghaus said, is that he is taking a “more cautious stance” on the drive stocks, given the multiple risks to both demand and production. |
