Benzinga | Oct 6, 2021 06:52AM EDT

Morgan Stanley Downgrades Seagate, Cuts Price Target By 25%

* Morgan Stanley analyst Katy Huberty downgraded Seagate Technology Holdings PLC (NASDAQ:STX) from Overweight to Equal-weight with a price target of $88.00, down from $118.00, implying a 3.35% upside.

* Huberty comments that Seagate benefits from accelerating data storage growth as enterprises adopt new data technologies like AI & IoT, helping return the company to mgmt's LT target for 3-6% revenue CAGR.

* Huberty was bullish on the long-term outlook for STX and the HDD industry, as greater than 50% of HDD revenue and capacity shipments are now to secularly growing end markets such as Cloud and VIA.

* However, STX isn't immune to cyclical demand weakness, and we see early signals pointing to moderating cyclical demand into year-end 2022.

* The combination of fading cyclical demand, rising channel inventories, and moderating ASP growth create a more balanced risk-reward going forward.

* Price Action: STX shares closed higher by 1.2% at $85.15 on Tuesday.