WDC - Seagate Technology tumbles 10% as Summit downgrades on weak Q4 results guidance

Seagate Technology ( NASDAQ: STX ) tumbled 10% on Friday after the hard-disk drive maker posted fourth-quarter results that missed estimates and gave weak guidance, prompting investment firm Summit Insights to downgrade the stock on worries over weakness in the cloud.

Analyst KinNgai Chan lowered the firm's rating on Seagate Technology ( STX ) shares to hold from buy, noting that while spending on the cloud is expected to remain "somewhat robust" for the rest of the year, it's possible that demand could moderate going into the first half of next year.

In addition, Chan noted that there is a "higher inventory level of large-cap HDD in the supply chain," consistent with what Seagate Technology ( STX ) has said publicly.

Seagate ( STX )'s weak results impacted competitor Western Digital ( WDC ), which saw its shares fall more than 5% on Friday.

The analyst also noted that PC and consumer demand is expected to continue to decline following the Covid-related boom, and there may be "continued sluggish demand from the security and imaging markets as China's real estate build slows down."

For the period ending July 1, Seagate ( STX ) generated $2.63B in revenue and earned an adjusted $1.59 per share, well below the $2.79B and $1.89 per share analysts were expecting.

Looking ahead to the fiscal first-quarter, Seagate ( STX ) said it expects to generate between $2.35B and $2.65B in revenue and earnings between $1.20 and $1.60 per share, compared to estimates of $3B and earnings of $2.21 per share.

Seagate’s chief executive officer Dave Mosley said the continuation of macro issues is continuing and the company is reducing production to maintain "supply discipline." The company is also managing expenses, Mosley added.

On Wednesday, Bank of America cut Seagate's ( STX ) estimates for 2022, citing weakness in both the consumer and PC markets .

Analysts have been mostly positive on Seagate Technology ( STX ). It had an average rating of BUY from Seeking Alpha authors , while Wall Street analysts also rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates STX a HOLD .

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