Goh Seng Chong /Bloomberg
Shares of Western Digital (WDC) and Seagate Technology (STX) are being battered Tuesday after a report from Evercore ISI warned of declining profit margins for both makers of hard drives and flash memory storage devices.
Seagate’s stock was down 8.6% to $48.92; Western Digital dropped 6.2% to $59.33.
Evercore downgraded its rating to “underperform” for Seagate while lowering its price target to $45 from $55. It wasn’t much better for Western Digital, whose stock was lowered to “in line.” The price target was sliced to $75 from $100.
“With topline likely flattish at best, GMs [gross profit margins] heading lower, and worse than expected NAND [flash memory] pricing driving increased potential for cannibalization of HDDs [hard disk drives], we see risk to the downside for Seagate after an excellent run,” Evercore analyst C.J. Muse warned in a note to clients Tuesday. “With NAND pricing expected to decline more aggressively through 1H19 … we simply find it hard to see [Western Digital] shares working into year-end.”
Muse expects average selling prices for NAND flash memory to dip by a “low double digit” percentage in the first half of 2019, as they did from late 2014 through early 2015.
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