Morgan Stanley analyst Katy Huberty downgraded Seagate Technology Holdings PLC (NASDAQ: STX) from Overweight to Equal-weight with a price target of $88.00, down from $118.00, implying a 3.35% upside.
Huberty comments that Seagate benefits from accelerating data storage growth as enterprises adopt new data technologies like AI & IoT, helping return the company to mgmt's LT target for 3-6% revenue CAGR.
Huberty was bullish on the long-term outlook for STX and the HDD industry, as greater than 50% of HDD revenue and capacity shipments are now to secularly growing end markets such as Cloud and VIA.
However, STX isn't immune to cyclical demand weakness, and we see early signals pointing to moderating cyclical demand into year-end 2022.
The combination of fading cyclical demand, rising channel inventories, and moderating ASP growth create a more balanced risk-reward going forward.
Price Action: STX shares closed higher by 1.2% at $85.15 on Tuesday.
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