Goldman Sachs Lowers STX Target To $15 Following Dec. Quarter

Seagate Technology STX reported December quarter below GS and consensus estimates, and guidance was lower than expected, Goldman Sachs reports. “December non-GAAP EPS was $0.33 on revenues of $2.72 bn, vs. consensus of $0.34 and $2.72 bn,” Goldman Sachs writes. “December quarter EPS was also pressured by discrete items affecting cost of revenue and tax line items, which together reduced EPS compared to our estimate by roughly $0.13. “Management estimates the HDD total addressable market (TAM) was 168 mn units last quarter, and expects a March quarter TAM in the range of 155 – 165mn units. Seagate guided to revenues and gross margin in the ranges of $2.55 – $2.70 bn and 18%-19%. Heading into the quarter, we had forecast 3QFY11 revenues and gross margin of $2.60 bn and 19.2%.” Goldman Sachs said that it is lowering its six-month PT to $15 from $16, “due to a lower fundamental value.” “Our $15 price target for STX is based on a weighted average of our fundamental value of $14 (75%), which is based on a 7.3X multiple on our normalized EPS estimate of $1.93 (from $2.06), and our M&A value (25%),” Goldman Sachs adds. “We lowered our fundamental value to $14 from $15 due to our updated forecast. We remain Neutral-rated on STX.” Seagate Technology closed Wednesday at $14.13.