Drive Stocks: This Time, Deutsche Bank and UBS Cut Estimates

The estimate cuts on the disk-drive stocks continue. Today’s moves come from Deutsche Bank and UBS.

• Deutsche Bank analyst Sherri Scribner this morning maintains Buy ratings on Seagate (STX) and Western Digital (WDC), but cuts numbers on the stock today, and likewise trims estimates on Hold rated Hutchinson Technology (HTCH). For Seagate, her June quarter EPS estimate drops to 70 cents, from 85 cents. For the June 2011 fiscal year, she goes to $3.20, from $3.57. For Western Digital, she now sees June profits of $1.20, down from $1.47. For FY 2011, she goes to $5.70, from $6.25. For HTCH, her September 2010 fiscal year estimate is now a loss of $1.99, down from a loss of $1.72. Scribner writes that “checks suggest that unit demand started off the quarter a bit light, and while the normal end-of-quarter activity has picked up, demand has not been enough to offset softer trends at the beginning of the quarter.” But she also contends that STX and WDC are far too cheap.
• UBS analyst Arun Sharma takes a similar approach: he is cutting estimates, but contends the stocks are too cheap, and that things are not likely to be as bad as expected. Sharma says the total addressable market for the June quarter is likely to be around 155 million, at the lower end of 155-160 million units guidance from both Seagate and Western Digital. He writes that the recent pullback has been overdone, with shares at current levels providing a “compelling buying opportunity as valuations embed an overly pessimistic environment” going forward. For FY Q4, he cuts his EPS forecast on STX to 75 cents, from 86 cents; for WDC, he’s going to $1.34, from $1.53. Sharma cuts his price target on STX to $25, from $31; for WDC his target is now $46, down from $55.

This morning:

• WDC is down 69 cents, or 2.2%, to $31.01.
• STX is down 34 cents, or 2.5%, to $13.54.

Previously:

• Disk Drives: Another Day, Another Round Of Estimates Cuts (June 28, 2010)
• Disk Drives: Barclays Trims Growth View; Cuts STX, WDC Ests (June 25, 2010)
• Drive Stocks Stumble As Price Declines Reportedly Accelerate (June 24, 2010)
• Disk Drives: Caris Cuts STX, WDC Ests On Weaker Drive Sales (June 15, 2010)
• Seagate: RBC Cuts Estimates, Targets On Eroding Drive Prices (June 7, 2010)