InvestIdeas

some has said hardisk is an obsolete products, this industry is facing downgrade from analyst recently.

Problem with this industry is because rich players like Samsung, Toshiba, Hitachi can afford to lose money making these things. While WDC and STX has to struggle with the profit margin. On the other hand the technology is reaching its limitation. Believe it, few years later we will max out the technology. See below interview with Seagate Vice-President of Recording Operations.

platinum wrote:But he also explained that this limit could be reached in two to three more generations of products - possibly between 2013 and 2015 - as companies make increasingly quicker drives.

Seagate was featured in cover of Forbes few years ago, a great company, especially when Steve Luczo took over as CEO. Earning per share up from 2.36245 (2008) to 3.13035 (2010 ended Jul-10). In the same period revenue was down.

As mentioned in previous post, this industry has 5 other players, Samsung, Toshiba, Fujitsu and Hitachi and WD. Of these 6 major players, only WDC and STX are solely making hardisk. Samsung has been trying to beat STX and WDC in releasing better product and they have been in loss making for many years. Hitachi has turn breakeven recently. WDC has been consistently taking STX market shares too for 3 years continuously.

Next, the product. Hardisk behave as commodity, price and volume determine the profitability. Better product, bigger capacity is basic requirement to be in the market. So I expect the share price to behave just like a commodity counter. Supply and demand, right.

Supply, now if you know demand is slowing, you can reduce production, fire some operators, but what about inventory? When there is excess inventory, the only choice is to cut price. Tom Armistead has some analysis related to this in seekingalpha. (He is vested in WDC by the way).

A presentationfrom STX pg 5 also shows inventory trend.

Stock price, following chart from reuters. This is buy side story here, low 5x PE, growth, undervalue, etc, etc.. buy & hold if you like to. There should be some consolidation and rebound here.

My view -> STX will go down to $3!!!!!

co-incidentally, when checking info at Seagate homepage, they are putting sales on homepage. Please take a look if you looking to buy some storage. Shipping to US only, so you need service (such as vpost) to divert the package to your home country if you are not is US. However, it confirms my view of excess inventory.

How about short Seagate and long Sandisk?

May be a good idea, but do not understand about flash market and profits margin. Stx is a play on excess inventory industry wide and external factors is taking control instead of the company.

not vested

Seagate Technology (STX) Beat Q3 Earnings, Misses Revenues

Seagate Technology Plc STX is one of the largest manufacturers of hard disk drives (HDD) which caters to the needs of individual and small businesses.

However, for the past few years the company is focusing on the larger enterprise segment, where technology upgrades and cloud-related investments are on the rise.

Moreover, Seagate’s cloud-based applications have generated ample customer interest.

Estimates for Seagate have moved northward, pushing up the Zacks Consensus Estimate as well. Also, the company does have somewhat decent history when it comes to recent earnings reports as the stock has beaten estimates thrice and misses once in the last four quarters.

Currently, Seagate has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

However, the Zacks Rank could definitely change following the company’s third-quarter fiscal 2017 report which was just released. We have highlighted some of the key stats from this just-revealed announcement below:

Earnings: Seagate reported non-GAAP earnings of $1.10, which beat the Zacks Consensus Estimate by 4 cents.

Source: Zack's Research

Seagate's stock pulls back sharply after revenue miss offsets profit beat

By Tomi Kilgore

Shares of Seagate Technology PLC STX, -16.30% slumped 5.7% in premarket trade Wednesday, after the data storage company reported fiscal third-quarter revenue that missed expectations.

The company swung to a profit of $194 million, or 65 cents a share, in the quarter to March 31, from a loss of $21 million, or 7 cents a share, in the same period a year ago.

Excluding non-recurring items, adjusted earnings per share came to $1.10, above the FactSet consensus of $1.07.

Revenue increased to $2.67 billion from $2.60 billion, but was below the FactSet consensus of $2.71 billion.

Cash flow from operations was $426 million, above the FactSet consensus of $340.6 million.

The stock had soared 32% year to date to close Tuesday at the highest level since September 2015.

Source: Yahoo Finance

vested

Seagate a Safe Bet Against Any Cloud Computing Sector Hiccups

by Tony Owusu

A slowdown in the cloud computing market would not be too detrimental to Seagate Technology (STX) analysts at Barclays wrote today.

"While hyperscale has been a growth driver for both models, any potential deceleration is not overly detrimental due to the relative strength compared to anticipated," analyst Mark Moskowitz wrote.

Source: The Street

https://www.thestreet.com/story/1408458 ... yptr=yahoo

vested

April 12, 2017

Seagate, Western Can Withstand Any Bump in the Cloud, Says Barclays

By Tiernan Ray

Cloud computing is an increasingly important market for hard drive makers Seagate Technology (STX) and Western Digital (WDC), and today Barclays analyst Mark Moskowitz offers his thoughts on what would happen should the market for storage in cloud cool.

His conclusion is while it could have some impact on sales growth for each company, it wouldn’t be something to worry about too much.

“While hyperscale has been a growth driver for both models,” writes Moskowitz, “any potential deceleration is not overly detrimental due to the relative strength compared to anticipated declines in other HDD segments (i.e., compute, performance, and client non-compute).”

Moskowitz, who has an Overweight rating on Western stock, and an Equal Weight on Seagate, estimates that cloud is presently a higher proportion of revenue for Seagate, about a fifth of its revenue, but meainginful fo both:

Enterprise drives, which are increasingly cloud related, have been growing in importance for both Seagate and WD revenue and more importantly profitability.

As a percentage of total enterprise HDDs, we estimate that ~40% are shipped to hyperscale vendors (in the form of capacity drives).

Hyperscale vendors have higher capacity requirements per disk (higher ASP), but also receive volume discounts (lower gross margin).

These variables lead us to believe that hyperscale vendors represent ~19% of Seagate revenue and ~22% of gross profit.

For WD, we believe hyperscale vendors represent ~11% of revenue and ~10% of gross profit.

Our base case for both models assumes 10% Y/Y hyperscale revenue growth in C2017. For Seagate, flexing hyperscale revenue from 0% Y/Y growth to 20% Y/Y growth could result in a 390 bps impact on total company revenue growth. By flexing WD’s hyperscale revenue over the same range, the impact on total revenue is only 220 bps.

It’s reasonable, he writes, to expect after a “robust 18 months” of investment by cloud companies, there could be “some cyclicality setting in.” But “Any pause should not be regarded as a permeant interlude,” because “the cloud is here to stay.”

Moskowitz likes Western better than Seagate because Seagate’s “model” could be “more exposed to bumps and secular decline in the mid to long term.”

Source: Barron's

http://blogs.barrons.com/techtraderdail ... yptr=yahoo

vested

The Biggest Loser: Seagate Technology Tumbles 17%

By Ben Levisohn

Seagate Technology (STX) tumbled to the bottom of the S&P 500 today after beating earnings forecasts but offering below-consensus fourth-quarter sales guidance.

Seagate Technology dropped 17% to $42.01 today, while the S&P 500 dipped 0.1% to 2,387.45.

FBN’s Shebly Seyrafi maintains his Outperform rating on Seagate Technology despite today’s plunge:

So why do we remain bullish? Please note that TTM free cash flow is $1.47B, which is ~10% of the current stock price.

This is allowing the company to offer investors a $.63 quarterly dividend, which translates into roughly a 6% dividend yield.

[Cloud service providers, or CSPs,] are looking to come back in CH2, which should help the company’s (higher-margin) enterprise business.

NG opex, which was $443M last quarter, is expected to go to $430M this quarter and to $400M by the end of C2017. This should help drive operating margin expansion and almost double-digit EPS growth in F2018.

Seagate Technology’s market capitalization fell to $12.4 billion today from $14.9 billion yesterday.

Source: Barron's

http://blogs.barrons.com/stockstowatcht ... yptr=yahoo

vested

CEO of struggling disk drive maker says business is 'stable' as shares plunge 16%

by Natalia Wojcik

April 27, 2017

CEO of struggling disk drive maker says business is stable as shares plunge 16%

CEO Steve Luczo was optimistic about Seagate Technology (NASDAQ: STX)'s most recent quarter, but the market wasn't.

Shares of the maker of disk drives on Wednesday closed down more than 16 percent after the company reported fiscal third-quarter revenue of $2.67 billion, below the analyst consensus for $2.71 billion, according to FactSet.

The Cupertino, California-based company did beat on earnings, reporting profit per share of $1.10 versus estimates for $1.07 per share, according to FactSet.

"The results of our financial performance this quarter reflect a stable demand environment, good operational execution and momentum in the stabilization of our business model," Luczo, who is also the company's chairman, said in a release after the results, but before the market opened.

Seagate deals primarily in hardware and has faced increased pressure on its business as consumers move increasingly to the cloud.

The shares extended their decline after the company said on a conference call that revenue this quarter would also fall short of expectations.

The stock's drop was a big win for hedge funds betting against it as more than 9 percent of the shares outstanding were sold short going into the report, according to data from FactSet.

Shares of Seagate were down more than 20 percent in the past three years as of Wednesday's close.

Source: CNBC

http://finance.yahoo.com/news/ceo-strug ... 43509.html