Seagate Inventory Correction In Full Swing, Analysts Say Post Q1

Rosenblatt analyst Kevin Cassidy maintained Seagate Technology Holdings PLC STX with a Buy and lowered the price target from $80 to $60 based on his downward revised estimates.

Seagate's management reported that demand for HDDs weakened through September following their negative pre-announcement. The issues are similar: China lockdowns, weaker consumer demand, and data center inventory reductions.

Management has moved to adjust production and costs to meet the lower-demand environment. Expect internal and customer inventory to decline significantly through the December quarter. 

Importantly, for the longer term, the company remains on track to ramp 30TB HAMR HDD production in mid-2023. Demand for mass capacity storage in data centers will likely remain healthy. 

Cassidy expects that it will be the new demand for higher capacity drives that will lift revenue throughout 2023. 

UBS analyst Munjal Shah downgraded from Buy to Neutral and lowered the price target from $85 to $55.

Morgan Stanley analyst Erik Woodring maintained an Equal-Weight and lowered the price target from $57 to $54.

Barclays analyst Tom O'Malley maintained an Equal-Weight and lowered the price target from $65 to $50.

Credit Suisse analyst Shannon Cross maintained a Neutral and lowered the price target from $65 to $60. She expected relatively weak results and guidance and thinks management (and investors) are hopeful F2Q23 is the trough.

Cross remains concerned about the duration of inventory clearance across the supply chain, she -re-rated the stock.

Mizuho analyst Vijay Rakesh maintained a Neutral and lowered the price target from $75 to $62. He believed STX could see continued softness with weaker data center spending, GM headwinds tied to underutilization charges, and an overhang from a BIS China entity shipment investigations. 

Rakes believes WDC could also see headwinds, given STX's HDD commentary combined with a weak NAND outlook. 

Price Action: STX shares traded lower by 2.54% at $52.04 on the last check Thursday.