Analysts Take Seagate to Task For Sucking So Bad

I can’t believe this company is stupid enough to pay a 7.4% dividend. I mean, really, who the fuck pays a 7.4% divvy in the tech space. I’m going out on a limb here and guessing that management owns a bunch of the stock. I know, I should just go look it up; but I don’t feel like it.

Will someone go check this for me? Thanks.

If they own a bunch of stock, then they’re using the companies cash flow as their personal piggy bank–via dividends that exceed normalcy. If not, they’re simply morons.

Analysts are slashing STX this morning off horrendous earnings. But don’t worry, the fucking dividend is still intact.

Via briefing.com

Mizuho notes STX preannounced negatively after the close, noting weaker HDD demand (down 18% q/q) with weakness in mission-critical enterprise HDD and PC desktop products. STX now sees MarQ revenue at $2.6B (versus prior $2.7B guide) with GM at 23%, 270bps below consensus, on lower utilization. They believe increasing 3D-NAND supply could remain a structural headwind for high-margin 10K/15K HDD drives. They’re not changing estimates here and they’re maintaining their Neutral rating.
Cowen lowers tgt to $35 from $36 on lower estimates following STX’s negative pre. What’s most worrisome to them, an issue they highlighted in their recent initiation, is the apparent tradeoff between servicing the $760MM/yr div’y (w/ FCF potentially <$800MM CY16) vs. making meaningful investments to offset challenges in core HDD TAM. If any, see risk to downside for WDC/MRVL, but both should fare better.
RBC Capital Mkts stays at Outperform, $36 tgt on STX following the negative pre-announcement after market close. Pre-announcement was $2.6B revs and 23% non-GAAP gross margin, on 39M units and 40% market share. Based on the preliminary results, they think co had share loss to WDC on enterprise front. They think TAM is likely to remain in the 95-98M range for JunQ (they are modeling 97M). Positively, hyperscale demand appeared to be better than expected as co saw strength in 8TB nearline products. Going into the earnings call on April 29, they think investors will focus on enterprise demand outlook and PC demand update.
Stifel now arrives at a non-GAAP EPS of ~$0.37, vs. their prior $0.61 estimate (Street: $0.63). They lowers F2016, F2017, and F2018 revenue/EPS estimates from $11.3B/$2.69, $11.4B/$3.91, and $11.4B/$4.14, respectively, to $11.1B/$2.14, $11.0B/$2.79, and $11.0B/$3.43. They maintain their Hold rating, and expect better results out of Western Digital (WDC). With $2.9B of net debt exiting F2Q16 and ~$700M/annum of dividend payments, the expect increasing investor questions/concern over Seagate’s balance sheet and/or capital allocation strategy going forward.
Maxim cuts tgt to $36 from $39. Given negative pre-announce details, we estimate mission critical HDD units likely declined ~25% y/y vs our prior estimate down 12% y/y. Their data points indicate the mission critical miss is not an issue that will subside, reducing FY17 EPS by 15%. They still see dividend as likely safe, but risk of a cut is rising, in their view. For WDC on a pro-forma basis the potential severe declines in mission critical will be neutral, in their view.
Needham cuts tgt to $41 from $47. Weak PCs and even softer mission-critical drives are not surprising to them. Their positive stance is based on: 1) maintained dividend (we continue to expect this, and it makes the >7% yield too good to ignore); and 2) manufacturing footprint consolidation of 20-30% of capacity and mix shift to a largely enterprise high-cap focus dramatically changes the business model. They see everything else in the interim as theater and would use any opportunities to build positions in the name. Maintain Buy.