Seagate Cut to “Sell” at Citigroup; Earnings Pressured by Lower Shipments and Margins (STX)

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Computer hard drive maker Seagate Technology ( STX ) on Friday received a big downgrade from analysts at Citigroup.

The firm cut its rating on STX from "Buy" all the way down to "Sell" and reduced its price target from $37 to $25. That new target suggests a nearly 12% downside to the stock's Thursday closing price of $28.25.

A Citigroup analyst commented, "We are revising down our 4CQ12 EPS estimates by 23% to $1.40 based on lower unit shipments of 58M (from 63M) and lower GM of 28.7% (from 30.5%). This is driven by our lowered 4CQ TAM assumption of 140M (vs guidance of 150-155M). We anticipate that GM will be pressured by low utilization, normal price declines, and lower mix of enterprise. For CY13, we are revising down our EPS to $6.01 (from $6.98) given lower shipments of 240M (from 254M) and a more conservative GM assumption of 28.3% (from 29.5%)."

Seagate shares fell $1.03, or -3.7%, in premarket trading Friday.

The Bottom Line
Shares of Seagate Technology ( STX ) have a 4.53% dividend yield, based on last night's closing stock price of $28.25. The stock has technical support in the $25-$26 price area. If the shares can firm up, we see overhead resistance around the $30-$32 price levels.

Seagate Technology ( STX ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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