A Selling Wave Washes Over Seagate

by Tom Taulli | January 29, 2013 1:05 pm

A Selling Wave Washes Over Seagate

SeagateLogo A Selling Wave Washes Over Seagate [1]Seagate Technology (NYSE:STX[2]) reported a disappointing fiscal second quarter today, which has so far knocked the stock down nearly 9% to $34.06. Other storage operators, like Western Digital (NASDAQ:WDC[3]) and Micron Technology (NASDAQ:MU[4]), are also lower for the day.

During the quarter, Seagate actually beat the Street’s forecasts. Revenues increased by 15% to $3.67 billion, and earnings fell by about 13% to $492 million, or $1.28 per share. The consensus was for revenues of $3.6 billion and EPS of $1.28.

But its third-quarter guidance was a bit weak. Seagate is looking for revenues of $3.25 billion to $3.45 billion. The Street estimate was for $3.48 billion.

Despite all this, Seagate continues to perform well despite a tough environment. Let’s face it, the PC market looks pretty bleak as Apple’s (NASDAQ:AAPL[5]) iPads continue to eat into the market share of companies like Dell (NASDAQ:DELL[6]) and Hewlett-Packard (NYSE:HPQ[7]) along giant chipmaker Intel (NASDAQ:INTC[8]).

But Seagate has been investing aggressively in other markets, such the cloud and mobile. For example, it recently formed a $40 million venture with Virident Systems to create flash storage memory products, which have been key for mobile devices.

If anything, the recent drop-off in Seagate’s stock has much to do with profit-taking. The shares are up 36% since late November.

So, for investors looking for a storage play, Seagate still looks attractive. After all, the shares are trading at only 4.5 times earnings. And the dividend yield is also juicy, coming to 4.1%.

Tom Taulli runs the InvestorPlace blog IPO Playbook[9], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[10]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[11].” Follow him on Twitter at @ttaulli[12]. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2010/08/SeagateLogo.jpg
  2. STX: http://studio-5.financialcontent.com/investplace/quote?Symbol=STX
  3. WDC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WDC
  4. MU: http://studio-5.financialcontent.com/investplace/quote?Symbol=MU
  5. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  6. DELL: http://studio-5.financialcontent.com/investplace/quote?Symbol=DELL
  7. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  8. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  9. IPO Playbook: http://investorplace.com/ipo-playbook/
  10. How to Create the Next Facebook: http://www.amazon.com/gp/product/1430246472/ref=s9_simh_gw_p14_d0_i1?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=center-3&pf_rd_r=0GRB6ZMCTYDZVNG7Q7NV&pf_rd_t=101&pf_rd_p=470938811&pf_rd_i=507846
  11. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders: http://goo.gl/pR2F3
  12. @ttaulli: https://twitter.com/ttaulli

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