Seagate Technology (NASDAQ:STX)

CAPS Rating: 4 out of 5

Engages in the design, manufacturing and marketing of rigid disc drives. Produces a range of rigid disc drive products, which are used in enterprise servers, mainframes and workstations.


Player Avatar EpikurFool (84.24) Submitted: 2/4/2013 12:49:13 PM : Outperform Start Price: $33.44 STX Score: +4.94

ROE>100, Gross Margin> 30, div. Yield>4%, PE 6, seems to be undervalued.

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Member Avatar summersnowflake (< 20) Submitted: 3/6/2013 4:56:07 AM
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Current lofty gross margin is not sustainable. Historical average HDD gross margin is in the teens. Reason for such high margin is due to the flood in Thailand last year resulting in severe undersupply.

PC OEMs had no choice back then but to sign long term agreements with Seagate, locking them into ridiculously high prices, which artificially increased Seagate's margin (GM > 30%). But those agreements are expiring this year.

As a result, STX gross margin will come down significantly in 2013/2014, and that will bring down EPS, ROE, and the stock price.

Member Avatar summersnowflake (< 20) Submitted: 3/6/2013 5:03:50 AM
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One more point I left out.... Seagate insiders sold $326M worth of stocks and bought ZERO in the past two years. Check Their CEO, CFO, Executive VP for Sales, VP for Treasury, sold millions of $ of stock each.

Is $326M a lot? Compare that to the previous two years, how much stocks did the insiders sell ? About $6M.

So why the rush to sell their stock? My take is they know the music will stop soon .... better take a seat or maybe rush out the door before everyone else.

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