Quantcast

How Seagate Technology PLC Shares Fell 17% Last Month


What happened

Shares of Seagate Technology (NASDAQ: STX) fell 17% in October of 2018, according to data from S&P Global Market Intelligence . After following the tech sector 13% lower through the first three weeks of the month, a bearish analyst note sent the hard drive maker's stock down to the basement. Two days later, Seagate's share prices had dropped more than 12% lower.

So what

On Oct. 23, analyst firm Susquehanna downgraded Seagate from "neutral" to "negative," arguing that the cloud computing market is swinging into a downturn. This is not a simple case of large cloud centers deploying their surplus inventories of storage hardware, but a real market shift that will impact Seagate "where it hurts the most." On top of that, Susquehanna analyst Mehdi Hosseini said that falling prices on NAND memory chips will let NAND-based solid-state storage devices (SSD) steal market share from traditional hard drives, whose only real selling point these days lies in their lower cost per gigabyte of storage space.

A screwdriver scrapes deep gouges into the magnetic platters of an open-case hard drive.

Image source: Getty Images.

Now what

This stock is trading at just 6.4 times trailing earnings today, and arguably for good reason. Seagate still doesn't have a credible strategy for moving into the SSD era of large-scale storage, leaving the company vulnerable to lower memory chip prices. Fellow Fool Leo Sun sees Seagate as a buy right now, coupling that bargain-bin valuation with an attractive 6% dividend yield. I respectfully disagree, keeping my hands off Seagate until the company comes up with a sustainable long-term business plan that doesn't rely on magnetic platters holding on to their cost advantages over SSD storage forever.

10 stocks we like better than Seagate Technology
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Seagate Technology wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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



This article appears in: Personal Finance , Stocks
Referenced Symbols: SSD , STX



More from Motley Fool

Subscribe






Motley Fool
Contributor:

Motley Fool

Market News, Investing










Research Brokers before you trade

Want to trade FX?