Seagate Technology (NASDAQ:STX) traded 8% lower on Tuesday morning, after Evercore Partners (NYSE:EVR) downgraded the stock to “underperform” and reduced its price target to $45 from $55.
Evercore identified declining pricing for flash memory using “NAND” technology, which is a core product for Seagate. Analysts at Baird also expect lower memory prices. Given this, Evercore forecasts flat revenue for STX as well lower gross margins.
"The market has gotten a bit complacent, especially with respect to demand elasticity for NAND," explained analyst CJ Muse, who also downgraded Western Digital (NASDAQ:WDC) with a similar rationale. WDC was trading 5% lower on Tuesday morning.
In looking at the market cycles for STX, we can see that the stock is in the declining phase of its current cycle. The chart illustrates that a “head and shoulders” top occurred earlier this year. Given this, our projection is around $46 by early October.
With regard to WDC, we believe the stock is likely completing the declining phase of its current cycle. As the new cycle begins, the stock is now due for a bounce, which will be short lived. Our forecast is for WDC to hit $50 by the end of the year.
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