It’s been a mediocre week for Seagate Technology plc (NASDAQ:STX) shareholders, with the stock dropping 10% to US$44.31 in the week since its latest full-year results. It was not a great result overall. While revenues of US$11b were in line with analyst predictions, earnings were less than expected, missing statutory estimates by 12% to hit US$3.79 per share. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Check out our latest analysis for Seagate Technology
Taking into account the latest results, the 21 analysts covering Seagate Technology provided consensus estimates of US$10.0b revenue in 2021, which would reflect a small 4.8% decline on its sales over the past 12 months. Statutory earnings per share are predicted to rise 2.5% to US$3.93. Before this earnings report, the analysts had been forecasting revenues of US$10.3b and earnings per share (EPS) of US$4.71 in 2021. The analysts seem less optimistic after the recent results, reducing their sales forecasts and making a real cut to earnings per share numbers.
The consensus price target fell 6.7% to US$50.30, with the weaker earnings outlook clearly leading valuation estimates. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Seagate Technology analyst has a price target of US$66.00 per share, while the most pessimistic values it at US$37.00. This shows there is still a bit of diversity in estimates, but analysts don’t appear to be totally split on the stock as though it might be a success or failure situation.
Of course, another way to look at these forecasts is to place them into context against the industry itself. One more thing stood out to us about these estimates, and it’s the idea that Seagate Technology’sdecline is expected to accelerate, with revenues forecast to fall 4.8% next year, topping off a historical decline of 3.9% a year over the past five years. Compare this against analyst estimates for companies in the wider industry, which suggest that revenues (in aggregate) are expected to grow 6.1% next year. So while a broad number of companies are forecast to decline, unfortunately Seagate Technology is expected to see its sales affected worse than other companies in the industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Seagate Technology’s future valuation.
With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Seagate Technology analysts – going out to 2023, and you can see them free on our platform here.
It is also worth noting that we have found 4 warning signs for Seagate Technology that you need to take into consideration.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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