Susquehanna Downgrades Western Digital and Seagate on Fears Demand Will Soon Peak
2022.04.14 15:56
Susquehanna Downgrades Western Digital (WDC)) and Seagate (STX) on Fears Demand Will Soon Peak
Susquehanna analyst Mehdi Hosseini downgraded shares of Western Digital (NASDAQ:WDC) and Seagate (STX) as he expects both companies will experience softer demand in 2023.
WDC stock is downgraded to Neutral from Positive with a $50.00 per share price target, down from $80.00. On the other hand, STX shares are cut to Negative from Neutral with a PT of $65.00, down from $93.00.
Hosseini expects quarterly cloud spending to peak in the second half of this year, followed by weaker demand into 2023.
“On the NAND/SSD side, we expect blended ASPs to rebound in June/Sep quarters, following a shallow correction in 2HCY21 and flattish trend in the Mar-Q. However, with the overall Cloud/Enterprise demand waning into YE22, we expect NAND ASPs to flatten out and actually decline again by YE22. Enterprise SSD is estimated to account for 38% of the overall NAND bit demand, followed by 25% attributed to Client SSD, and 20% to smartphones. All in all, we are updating estimates, with our overall CY23 EPS estimates for both STX and WDC 30%+ below the current consensus,” Hosseini said in a client note.
While the analyst takes into consideration that both STX and WDC are down 28% YTD, he still sees a downside risk, especially for the former, given “the extent of deceleration in Cloud capex spend by YE22 and into 2023, and its impact.”
Despite a relatively stronger Nearline shipment in 2HCY22, we believe the 30% downside risk to CY23 is the biggest overhang that cannot be avoided,” the analyst concluded.
By Senad Karaahmetovic
