Deutsche Bank analysts provided their views on Seagate Technology Holdings plc (NASDAQ:STX) ahead of the upcoming Q1 results announcement, lowering their estimates as cloud demand weakens and cutting their price target to $60 from $72.
TrendFocus recently published its preliminary HDD data showing industry unit shipment declined approximately 14% quarter-over-quarter in Q3, which the analysts believe is already reflected in the company's revised revenue guidance of down 20% quarter-over-quarter. According to the analysts, the bigger surprise comes from TrendFocus predicting industry shipment could decline by another 15% quarter-over-quarter in Q4, highlighting that storage demand from large U.S. cloud customers could drop sharply in Q4 and Q1.
On the supply side, the company has already reduced its HDD production which should help minimize inventory build, but by doing so the company would likely incur underutilization charges, negatively impacting its gross margin.
Reflecting these trends, the analysts lowered their 2022/2023 EPS estimates from $5.54/$8.00 to $5.12/$6.50, compared to the Street's estimate of $5.34/$6.61.