WDC - Seagate Technology falls as BofA cuts estimates citing consumer PC market weakness

Seagate Technology ( NASDAQ: STX ) shares fell on Wednesday as Bank of America cut estimates for 2022, citing weakness in both the consumer and PC markets.

Analyst Wamsi Mohan, who has a buy rating on Seagate Technology ( STX ) shares, lowered his estimates for the June quarter to $1.80 per share in earnings and $2.72B in revenue, compared to Wall Street estimates of $1.92 per share and $2.81B, respectively.

He also cut estimates for the September quarter to be $1.85 per share on $2.78B in revenue, compared to estimates of $2.28 per share and $3.03B in revenue.

For fiscal 2022, Mohan lowered his earnings per share and revenue estimates to $8.39 and $11.8B, down from $8.54 and $11.9B, respectively.

Mohan noted that data points going into fiscal fourth-quarter earnings on July 21 have suggested "end demand weakness in consumer and PC markets." Coupled with rising inflation, China's COVID-related lockdowns and subsequent spending weakness and the impact of Russia's invasion of Ukraine, all of these together "have created headwinds."

Seagate Technology ( STX ) shares dropped 3% to $78.36 in premarket trading.

Despite the estimate cuts, Mohan said Seagate Technology ( STX ) is better prepared for the next downturn compared to the Great Financial Crisis, citing its "focus on mass capacity segments and less dependence on legacy markets."

The analyst also noted that improved visibility from long-term agreements and better hard disk drive supply and demand could support pricing and margins. For now, demand from the cloud is still strong, but there are continued delays in certain projects, likely due to China's COVID-related lockdowns.

"In our opinion, macro weakness and any continuing China lockdowns could lead to further delays in the Sep quarter," Mohan added.

Last week, Deutsche Bank cut earnings estimates on Seagate Technology ( STX ) and its competitor Western Digital ( WDC ), noting recent spending weakness could spill over and impact cloud and enterprise spending .

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