JP Morgan Downgrades Seagate Technology to “Underweight”
Analysts at JP Morgan downgraded electronic date storage provider Seagate Technology plc (STX) on Wednesday due to poor market fundamentals causing the stock to drop in premarket trading.
The analysts downgraded STX from “Neutral” to “Underweight” with a price target of $20, down from the previous target of $25. The new $20 valuation is a -31% downside from Tuesday’s closing price of $29.03.
“While Seagate has benefited disproportionally from the impact of the tragic Thailand flood over the past year, we believe macroeconomic and secular factors stand to pressure the company’s revenue and gross margin profiles,” analyst JP Morgan Mark Moskowitz said. “In our view, HDD stocks trade on gross margin trend-lines, which are likely to worsen, driving our call today.”
He went on to say, “We believe that as signs of deteriorating fundamentals manifest, investors likely will lock in gains in Seagate and rotate into other stocks in 2013. In our view, the stock already has adjusted for the favorable capital allocation strategy.”
Seagate shares were down $1.23, or -4.24%, in premarket trading on Wednesday.
The Bottom Line
Shares of Seagate Technology (STX) have a 5.24% dividend yield, based on last night’s closing stock price of $29.03. The stock has technical support in the $25 price area. If the shares can firm up, we see overhead resistance around the $32 price level.
Seagate Technology plc (STX) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.
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