Wall Street’s love affair with disk drive makers might be coming to an end.
Investors had been up on the stocks until recently, when both Lake Forest-based Western Digital Corp. and top rival Seagate Technology LLC have seen downgrades.
Analysts have voiced concerns about a variety of factors, including falling prices, weaker demand for desktop PCs and potential inventory issues.
Western Digital’s shares slumped Friday after an analyst cut his price target on the company’s shares and downgraded Seagate.
Western Digital’s stock was down more than 7% in New York afternoon trading. The company had a recent market value of about $6 billion.
Seagate slumped 5% on a market value of about $11 billion.
An analyst from brokerage Goldman Sachs cut his price target on Western Digital to $33, down from $36. The shares were trading at about $28 on Friday.
Goldman Sachs also kicked Seagate off of its “America’s buy list” and downgraded it to “neutral,” citing concerns about a glut of disk drives that might squeeze profits.
Two weeks ago Robert W. Baird & Co. analyst Jayson Noland cut his price target on Western Digital’s shares to $32 from $35, citing weakening industry conditions and lower prices.
Noland also lowered his rating on Seagate’s stock to “neutral” from “outperform” on concerns about the disk drive industry overall.
And Thomas Weisel Partners analyst Doug Reid recently downgraded Seagate to “market weight” from “overweight” citing a “more muted growth outlook” relative to Western Digital.
Reid said he expects slowing growth in the PC market to put a squeeze on both Seagate and Western Digital, according to an Associated Press report.
Until recently, Western Digital had seen a bullish run amid steady sales, prices and supply of disk drives.
It’s stock is up roughly 70% in the last 12 months.
