2 Chip Stocks Lower After Analyst Downgrades

Both WDC and STX are at risk for more bearish analyst attention

Managing Editor
Sep 4, 2018 at 9:54 AM
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Evercore ISI weighed in on the chip sector, downgrading Western Digital Corp (NASDAQ:WDC) to "in line" from "outperform," while slashing its price target to $75 from $100. In addition, sector rival Seagate Technology PLC (NASDAQ:STX) saw its rating cut to "underperform" from "in line," and its price target dropped to $45 from $55. The brokerage firm attributed the decline in NAND pricing, as well as peaking profit margins, as reasons for the downgrades. 

WDC Sinks to Fresh Record Low 

At last check, Western Digital stock was down 2.6% to trade at $61.58, fresh off a new annual low of $61.52. The shares have been sliding since late May, guided by their descending 20-day moving average. What's more, the equity just logged its seventh straight weekly loss -- thanks in part to a late-July earnings-related bear gap -- and has now shed 23% in 2018.

Even with the downgrade, there is room for additional bearish analyst notes that could create more headwinds in the future. The majority of the 19 brokerages covering WDC rate it a "strong buy." Further, the security's average 12-month price target of $104.63 is a 72% premium to its current perch. 

STX Tests Key Technical Level After Bear Note

Looking at Seagate Technology, the stock is down 7.1% to trade at $49.76. Since topping out at a three-year peak of $62.70 on April 17, the security has churned beneath a trendline connecting lower highs. Today's drop has the shares trading below their 200-day moving average, and testing the round $50 level which has served as support since mid-February. Nevertheless, the equity still boasts a 19.3% lead in 2018.

Most analysts are already skeptical of STX stock, though. Of the 15 brokerages in coverage, 12 maintain a "neutral" or "sell" recommendation. However, considering the consensus 12-month price target sits all the way up at $57.86, more price-target cuts could come down the pike.

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