Citigroup downgrades Seagate, Western Digital
NEW YORK (AP) — A Citigroup analyst on Friday downgraded the shares of Seagate Technology PLC and Western Digital Corp., two leading makers of hard drives, to "Sell" from "Buy" because he sees weakness not just in the PC sector, but in corporate spending on servers and storage arrays, which also use hard drives.
The long-term prospects for the hard-drive makers are still good, Citigroup's Joe Yoo wrote, because the need for data storage is growing. But in the near term, earnings for the two companies are at risk because PC sales have been weak and makers of enterprise storage systems have cut back on orders. Yoo believes the launch of Windows 8 at the end of October will be a "non-event for traditional PCs."
Yoo noted that hard-drive stocks have done well this year — much better than PC-maker shares — because of industry consolidation and a bounce in shipments after flooding in Thailand knocked out hard-drive factories late last year.
Yoo set a price target of $25 on shares of Seagate, which is based in Cupertino, Calif., and $32 on shares of Western Digital, which is based in Irvine, Calif.
Western Digital shares fell 58 cents, or 1.6 percent, to $36.01 per share in early afternoon trading. Seagate shares fell 8 cents to $28.17.