Why Did Shares of Seagate Rise on June 28?



Seagate’s price movement

Seagate Technologies (STX) has a market cap of ~$6.1 billion. Its stock rose by 7.9% to close at $22.53 per share on June 28, 2016. The stock’s weekly, monthly, and trailing 12-month (or TTM) price movements were -5.6%, 4%, and -54%, respectively, on the same day.

Seagate is trading 3.5% below its 20-day moving average, 0.53% above its 50-day moving average, and 18.5% below its 100-day moving average.

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Related ETF and peers

The Technology Select Sector SPDR ETF (XLK) invests 0.2% of its holdings in STX. The market caps of STX’s competitors are as follows:

  • Western Digital (WDC): ~$9.1 billion
  • EMC (EMC): $52.6 billion
  • NetApp (NTAP): ~$6.0 billion

Tech stocks rally for the first time after Brexit vote

Technology heavyweights Microsoft (MSFT) and Facebook (FB) also rose by 2.1% and 3.4%, respectively, on June 28.

With respect to Brexit, John Conlon, the chief equity strategist at People’s Wealth Management, stated, “People are calming down and looking at it more rationally. It’s a combination of that plus the fact that by now you’ve seen the investors that were betting that Brexit wasn’t going to happen finally unwinding those bets.”

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Seagate continues to grapple with slowing sales

In April 2016, Seagate Technology (STX) reported its fiscal 3Q16 results. Earlier that month, Seagate announced its preliminary earnings results and lowered its revenue and margin estimates for fiscal 3Q16.

The company cited weaker-than-expected demand and inventory declines in enterprise disk drives as the primary reasons for this guidance. Seagate expected its revenue to be $2.6 billion, compared to its earlier guidance of $2.7 billion.

Seagate Technology reportedly shipped ~39.2 million HDD (hard disk drive) units in fiscal 3Q16, which ended on March 31, 2016. This represents a significant YoY (year-over-year) fall compared to the company’s 50.1 million units shipped in fiscal 3Q15.

This decline is a concern for Seagate, as it has a market share of ~40% in the United States. HDDs are used in personal computers. According to market research company Gartner, PC shipments in the last quarter are expected to have fallen by 9.6% YoY to 64.8 million units, driven by the increasing dominance of mobile devices.


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