Semiconductor Stock Could Buck Sector Woes, Says Analyst

The equity has been outperforming many of its sector peers in 2021

Deputy Editor
Aug 16, 2021 at 10:47 AM
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The shares of Seagate Technology Holdings PLC (NASDAQ:STX) are up 1.7% at $91.81 this morning, following an upgrade from UBS to "buy" from "neutral." The analyst noted Seagate's structural changes in its hard disk drives (HDD) segment, as well as strong cyclical dynamics, and lifted its price target to $105 from $83.

STX is up 46.6% in 2021 already, while many other sector giants, including Micron (MU) and Western Digital (WDC) have struggled this year in comparison. in fact, the same analyst slashed its price target on WDC to $66 from $72. A look at Seagate stock's technical setup shows the 200-day moving average now emerging as potential support. 

Sentiment looks mixed from the brokerage bunch. Of the 17 covering STX, six still say "hold." The 12-month consensus price target of $104, meanwhile, is a 13.1% premium to current levels. 

An unwinding of pessimism in the options pits could push STX higher. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 50-day put/call volume ratio that stands higher than all but 1% of readings from the past 12 months. This implies options traders are picking up puts at a much quicker-than-usual clip. 

These options can be had at a relative bargain right now too, per STX's Schaeffer's Volatility Index (SVI) of 30%, which stands higher than just 11% of annual readings, meaning options traders are pricing in low volatility expectations at the moment. Plus, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 86 out of a possible 100. This suggests the stock tends to outperform these expectations. 

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